Question
If a floating-rate note's quoted margin exceeds its discount margin, how should it trade?
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Answer
At a premium to par.
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Question
Why must investors be careful when comparing money market yields across instruments?
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Answer
Different conventions can quote different yields for the same cash flows.
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Question
If two money market instruments have the same FV−P, which quoted yield will usually be higher: discount rate or add-on rate?
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Answer
Add-on rate.
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Question
Why does a discount rate understate the true return on a money market instrument?
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Answer
It divides the gain by FV instead of the lower invested amount P.
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