Why is the duration of a floating rate bond half the time remaining till next payment?
The effective duration of a floating-rate bond is about half the time to the next payment because interest rates may change somewhat between today and the coupon date, so the price may change somewhat between today and the coupon date, but on the coupon date the price will reset to par. Therefore, the price isn’t going to change very much. The half-the-time-to-the-next-payment-date rule of thumb is easy; if you want a more accurate effective duration, you’ll have to build a binomial interest rate tree.