With a floating-rate note, the interest rate on the note changes ________.
A) when the risk level of the borrower changes
B) when the prime rate changes
C) when the demand for loans changes
D) when bank profits changes

Question

Quizplus · Accepted Answer

The interest rate on a floating-rate note changes when the prime rate changes. The prime rate reflects the interest rate that banks charge their most creditworthy customers, and changes in response to changes in the Federal Reserve's monetary policy and other macroeconomic factors.

With a Floating-Rate Note, the Interest Rate on the Note