Which of the following interest rates would be inappropriate for use as a base rate for a variable rate bond?
A)The prime rate
B)LIBOR
C)A rate determined by the bond issuer's board of directors.
D)The 10-year Treasury bond rate.

Question

Quizplus · Accepted Answer

A rate determined by the bond issuer's board of directors would not be an appropriate base rate for a variable rate bond as it lacks transparency and may be subject to manipulation by the issuer. The other three options are standard and widely recognized benchmark rates for variable rate bonds. Therefore, the best choice is D (The 10-year Treasury bond rate).

Which of the Following Interest Rates Would Be Inappropriate for Use