An interest rate that adjusts to current market conditions is called a(n):
A)floating rate.
B)fixed rate.
C)notional rate.
D)arbitrage rate.
E)preferential rate

Question

Quizplus · Accepted Answer

A floating rate, also known as an adjustable rate or variable rate, adjusts to current market conditions such as changes in the prime rate or other benchmark rates. This is in contrast to a fixed rate, which does not change over the life of a loan or investment. The other answer choices are not relevant to the definition of an interest rate that adjusts to market conditions.

An Interest Rate That Adjusts to Current Market Conditions Is