Floating-rate bonds have adjustable coupons to protect investors against changes in interest rates. The rates paid may be limited by

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Floating-rate bonds typically have a floor rate that sets the minimum coupon payment and a cap rate that sets the maximum coupon payment. This protects investors from interest rate changes while also setting boundaries on the potential coupon payments. Therefore, both a floor rate and a cap rate are typically used to limit the rates paid on the bond.

Floating-Rate Bonds Have Adjustable Coupons to Protect Investors Against Changes