Question

Which of the following best defines a floating-rate bond?

A A bond with a fixed interest rate and has better yield than varying interest rate bond Correct Answer Incorrect Answer
B A bond with a fixed interest rate and has lower yield than varying interest rate bond Correct Answer Incorrect Answer
C A bond with a varying interest rate and has better yield than fixed interest rate bond Correct Answer Incorrect Answer
D A bond with a varying interest rate and has lower yield than fixed interest rate bond Correct Answer Incorrect Answer
E None of these Correct Answer Incorrect Answer

Solution

A bond with a varying interest rate and has lower yield than fixed interest rate bond   Floating rate bonds have variable interest rate and protect investors against a rise in interest rates (which have an inverse relationship with bond prices). They also carry lower yields than fixed notes of the same maturity

Practice Next

Relevant for Exams:

×
×