Floating rate bonds

Question

Floating rate bonds

Quizplus · Accepted Answer

Floating rate bonds have interest payments that are based on some overall market rate, which is usually tied to a benchmark such as LIBOR or the prime rate. This means that their interest rates can adjust over time, which gives them a better capacity for constant market value. However, there are usually very broad limits on how much the interest payments can exceed or be below the benchmark rate. Therefore, all of the options listed in the question are correct.

Floating Rate Bonds