Consider the auction of 2-year Floating Rate Notes in April 2014. As we saw in class, the notes are priced at par and investors receive face value at maturity. Coupon interest payments are indexed to the 13-week T-bill and are made quarterly (July, October, January, April). The April 2014 13-week T-bill rate (known at the time of the auction) was 0.030% and the spread (determined at auction) was 0.069%.
Once the spread was determined at the auction, which cash flows were known with certainty to investors in the Floating Rate Note?
Given the 13-week T-bill rates in 2014 and 2015 below, what are the July 2014, October 2014, January 2015, April 2015, July 2015 and October 2015 coupon interest payments per $100 face value?
Date 13-week T-bill Rate
April 2014 0.030%
July 2014 0.025%
October 2014 0.020%
January 2015 0.020%
April 2015 0.025%
July 2015 0.050%
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