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 the above.

Question

Quizplus · Accepted Answer

Inverse floaters and super-inverse floaters have higher coupon rates than regular bonds, but their coupon payments decrease as interest rates increase. As a result, they are more valuable to a purchaser if interest rates fall, because the reduced coupon payments will be less significant at lower interest rates.

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