Asked by Jacob Delgado on Jul 08, 2024
Verified
A floating-rate bond by definition has a:
A) Principal amount that varies with the inflation rate.
B) Principal amount that varies with the time to maturity.
C) Coupon payment that varies with an interest rate index.
D) Coupon payment that varies with the time to maturity.
E) Coupon payment that varies with the amount of debt outstanding.
Floating-Rate Bond
A bond whose interest payments fluctuate with the market interest rates, rather than being fixed.
Coupon Payment
The annual interest payment made to bondholders, typically expressed as a percentage of the face value.
Interest Rate Index
A benchmark interest rate that serves as a reference point for determining interest rates on various financial instruments or loans.
- Understand the distinctive features of specific bonds including callable, convertible, and zero-coupon bonds.
Verified Answer
YO
Youcef OuldbrahimJul 14, 2024
Final Answer :
C
Explanation :
A floating-rate bond has a coupon payment that varies with an interest rate index, adjusting at specified intervals to reflect changes in market interest rates.
Learning Objectives
- Understand the distinctive features of specific bonds including callable, convertible, and zero-coupon bonds.
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