An inverse floater and a super-inverse floater are more valuable to a purchaser if:
A) interest rates stay the same.
B) interest rates fall.
C) interest rates rise.
D) held for a long time.
E) None of these.

Question

Quizplus · Accepted Answer

Inverse floaters and super-inverse floaters have higher coupon rates but are more sensitive to changes in interest rates. Therefore, their values increase when interest rates fall, making them more valuable to purchasers.

An Inverse Floater and a Super-Inverse Floater Are More Valuable