A reverse floater is riskier than a regular bond because:

Question

Quizplus · Accepted Answer

Reverse floaters are structured in a way that their interest payments increase with rising interest rates, but this also means that when interest rates rise, the value of the reverse floater drops by more than a regular bond. This is because as interest rates increase, the yield on the reverse floater also increases, making it less attractive to investors, and thus driving its price down further.

A Reverse Floater Is Riskier Than a Regular Bond Because