Q6:

The U.S. Treasury began issuing Floating Rate Notes (FRNs) in January 2014. Unlike usual bonds with fixed coupon rates, FRNs pay varying amounts of coupon quarterly until maturity. The coupon rate rises and falls, and it equals the 3-month treasury bill rate 3 months ago. For example, in September, the coupon rate is the 3-month treasury bill rate from June to September. By nature of their security design, FRN prices fluctuate far less than those of other Treasury securities. Since its introduction, FRNs have become one of the most popular types of Treasury debt. When it was first issued, traders on the market tried to figure out how to price the FRNs. As a trader, you want to apply your knowledge in derivatives to the problem.

In March, what should be the price of a 3-quarter FRN that matures in December with a face value of 100?