The motivation for floating rate bonds arose out of the costly experience of the early 1980s when inflation pushed interest rates to very high levels causing sharp declines in the prices of long-term bonds.

Question

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This statement accurately reflects the motivation for floating rate bonds. As inflation rose in the early 1980s, fixed rate bonds issued at lower interest rates became less valuable, causing sharp declines in their prices. Floating rate bonds, which adjust their interest rates based on changes in prevailing interest rates, were developed as a way to mitigate this risk and protect investors from the losses suffered by holding fixed rate bonds during periods of high inflation.

The Motivation for Floating Rate Bonds Arose Out of the Costly