The purpose of a floating-rate bond is to:
A)Save interest expense for corporate issuers
B)Avoid making interest payments until maturity
C)Shift the yield curve
D)Offer rates adjusted to current market conditions

Question

Quizplus · Accepted Answer

The purpose of a floating-rate bond is to offer rates that are adjusted to current market conditions. These rates are typically tied to a benchmark interest rate, such as the London Interbank Offered Rate (LIBOR), and will adjust periodically over the lifespan of the bond. This allows investors to earn a return that reflects changes in interest rates and inflation, which can be particularly beneficial in a rising-rate environment.

The Purpose of a Floating-Rate Bond Is To