Floating rate notes (
FRNs) are
bonds that have a variable
coupon, equal to a
money market reference rate, like
LIBOR or
federal funds rate, plus a
quoted spread (also known as
quoted margin). The spread is a rate that remains constant. Almost all FRNs have quarterly coupons, i.e. they pay out interest every three months. At the beginning of each coupon period, the coupon is calculated by taking the fixing of the
reference rate for that day and adding the spread. A typical coupon would look like 3 months USD LIBOR +0.20%.