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Policies, the Citicorp Notes were treated as a cash equivalent
for this reason.
According to petitioner, this understanding is subject to
significant qualifications. Petitioner relies on the
observations of one of its experts, Joseph Grundfest (Grundfest)
of Stanford University. Grundfest notes that the decision to
purchase a FRN locks in a return tied to a specified floating
rate index. There are several indices, LIBOR, treasury bill,
Federal funds rates, etc., and their relationship is not stable
over time. Payments on FRN's can vary substantially depending on
the choice of the underlying index. Grundfest goes on to cite
actual examples of significant discrepancies between certain
floating rate indices that occurred during and around the years
at issue.
We cannot quarrel with these observations. How much
significance we should attach to the potential for such market
discrepancies as a basis for a reasonable expectation of profit
is another matter. FRN's are commonly used by investors as a
substitute for short term money market instruments such as
certificates of deposit (CD's). Historical interest rate data
introduced in evidence confirm that changes in the 1-month
commercial paper rate and CD rate are not perfectly correlated.
Over the 71 months from January 1984 to November 1989, the two
rates fluctuated, but generally remained within 15 basis points
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