We've primarily discussed fixed$-$rate coupon bonds with stable coupon payments. However,

another category of bonds utilizes floating $($or variable$)$ rates, meaning their coupons adjust

based on market interest rates.

Consider a two$-$year floating$-$rate bond with annual coupon payments tied to the one$-$year

Treasury rate. Imagine it's issued on March $1,2024.$ The first coupon will be paid on March $1,$

$2025($one year later$)$ using the one$-$year Treasury rate as of March $1,2024.$ Similarly, the

second coupon on March $1,2026,$ will use the one$-$year Treasury rate as of March $1,2025.$

A$.$ Consider a one$-$year floating rate bond with an annual coupon payment. The coupon rate

will be the one$-$year market interest rate. If the par value of the bond is $$1,000,$ what would

be the value of the bond at issuance?

B$.$ Consider a two$-$year floating rate bond with annual coupon payments. The coupon rate will

be the one$-$year market interest rate. If the par value of the bond is $$1,000,$ what would be

the value of the bond at issuance?