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BOND MATH: The Theory Behind the Formulas by Donald J. Smith

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Chapter 7: Floaters and Linkers

Equation 7.3 provides a general pricing formula for a floating-rate note. It is repeated here.

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MV is the market value of the floater, including accrued interest; INT is the next interest payment; FV is the face (or par) value; PVANN is the present value of the annuity representing the difference between the quoted margin (QM) and the discount margin (DM), y is the yield used to discount the future cash flows, and t/T is the fraction of the period that has gone by.

The Macaulay duration of the floater (MacDurFRN) follows the Chapter 6 equation 6.3.

Using A7.1, the first derivative of MV with respect to the yield ...

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