The upper and lower limits on the coupon rate of a floating-rate bond are referred to as the bond's

Question

Quizplus · Accepted Answer

The upper and lower limits on the coupon rate of a floating-rate bond are referred to as a "collar." The collar is designed to protect both the issuer and the investor from extreme swings in interest rates. The collar sets a cap (maximum interest rate) and a floor (minimum interest rate), and the interest rate on the bond will vary within this range based on changes in the market interest rates.

The Upper and Lower Limits on the Coupon Rate of a Floating-Rate