Question
Floating-rate bonds are designed to minimise which of
the following risks?Solution
Floating Rate Bonds (FRBs) are bonds that have a variable coupon, equal to a money market reference rate (like MIBOR or LIBOR) plus a quoted spread (i.e., quoted margin). · Floating rate bonds allow the investor to earn a rate of interest income tied to current interest rates. As such, FRBs carry little interest rate risk. · Its price shows very low sensitivity to changes in market interest rates. When market rates rise, the expected coupons of the FRB increase in line with the increase in forward rates, which means its price remains constant. Thus, FRBs differ from fixed rate bonds, whose prices decline when market rates rise. As FRBs are very less sensitive to interest rate risk, they are considered conservative investments for investors who believe market rates will increase.
1.     Recently USA suspended $ 255 mn financial aid to a country under the charge of not doing enough to curb extremism and terrorism. The count...
Which among the following help reduce our Current Account Deficit (CAD)?
SEBI regulates Money market and RBI regulates capital market
Which river flows through the city of Lucknow?
Plug and Muzzle are the terms associated with which sport?
Where is the National Library of India located?
Which of the following bodies will manage the ₹750 crore AgriSURE Fund for start-ups and rural enterprises?
The headquarter of International Cricket Council is located at
Euro the currency is not used by which European country?
Who has been appointed as the new Chairman of Indian Space Research Organization?