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If we have the market price of an FRN, we can also use Equation 1 to estimate the discount margin. Suppose that a two-year FRN pays MRR plus 0.75% on a semiannual basis. Currently, MRR is 1.10% and the price of the floater is 95.50 per 100 of par value, a discount to par, because of worsening credit risk. For Equation 1, we have the following inputs:
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