Floating-rate notes (FRN)
A)experience very volatile price changes between reset dates
B)are typically medium-term bonds with coupon payments indexed to some reference rate (e.g.LIBOR)
C)appeal to investors with strong need to preserve the principal value of the investment should they need to liquidate prior to the maturity of the bonds
D)b and c

Question

Quizplus · Accepted Answer

Floating-rate notes (FRN) are typically medium-term bonds that have coupon payments indexed to some reference rate (e.g. LIBOR). The interest rate paid to the holder of the bond is periodically reset based on the reference rate. This makes FRNs a suitable investment option for investors with a strong need to preserve the principal value of the investment should they need to liquidate prior to the maturity of the bonds. However, these notes may experience volatile price changes between reset dates. Therefore, the best choice would be options (b) and (c).

Floating-Rate Notes (FRN)