the reference rate will not change over the securitys life. Second, current yield considers only cou- pon interest and no other source of return that will affect an investors yield. Simply put, the current yield assumes that the floater delivers a perpetual annuity. Third, current yield ignores the potential impact of any embedded options.   Comparing Floaters with Different Reset Dates To compare the current yields of two floaters with different coupon reset dates, an adjustment known as the weighted average rate is uti- lized. The comparison requires two assumptions: (1) the coupon pay- ments of the two floaters are determined using the same reference rate and (2) the frequency with which the coupon payments are reset is the same (e.g., semiannually, monthly, etc.). It is presumed that two floaters that share these attributes will produce the same current yield regardless of their respective terms to maturity. The weighted average rate is simply the weighted average coupon rate over some anticipated holding period where the weights are the fraction of the holding period prior to the coupon reset date and the fraction of the holding period subsequent to the coupon reset date. (The holding period is assumed to contain only one coupon reset date. Accordingly, it is presumed an investor is considering the purchase of a floater as an alternative to a money market instrument.) On the reset     date, it is assumed the new coupon rate is the current value of the refer- ence rate adjusted for a spread. The formula for the weighted average rate is given by:   Weighted average rate (Currentcoupon´w )+ [Assumednewcoupon´(1- w )]   (2) = ------------------------------------------------------------------------------------------------------------------------------------------------------ Number of days in the holding period     where w is the number of days to the coupon reset date divided by the number of days in the anticipated holding period. The floaters current yield is then determined by dividing the weighted average rate by the market price. To illustrate the calculation, suppose an investor is considering the purchase of one of two floaters for an anticipated holding period of 180 days. The purchase candidates are two issues with identical coupon for- mulas of 6-month LIBOR plus 90 basis points. Security A has a current