A floating rate note’s coupon resets periodically based on a reference rate plus a fixed spread, so its interest payment moves with market rates.
How it works
The reference rate plus the spread (converted from basis points) gives the current coupon rate. Face value times that rate, times the period’s days divided by 360, gives the interest payment.
What this does not include
This computes a single reset period’s payment — the coupon rate itself changes at each reset date based on the then-current reference rate, meaning future payments will differ from this period’s calculation.
How to use this calculator
- Enter face value, the current reference rate, the spread in basis points, and days in this interest period.
Frequently asked questions
Why would an investor prefer an FRN over a fixed-rate bond?
An FRN’s price stays closer to par as rates change, since the coupon adjusts with the market — a fixed-rate bond’s price instead moves inversely with rate changes.
What reference rate do most FRNs use?
Historically LIBOR-based, most FRNs now reference SOFR (Secured Overnight Financing Rate) following the industry-wide transition away from LIBOR.
Is a basis point the same as a percentage point?
No — one basis point equals 0.01%, so 100 basis points equals 1 percentage point; spreads are typically quoted in basis points for precision.
