Investment Term For The Day - Inverse Floater
Sep 22, 2021 ·
1m 53s
An inverse floater is a bond or other type of debt whose coupon rate has an inverse relationship to a benchmark rate. An inverse floater adjusts its coupon payment as...
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An inverse floater is a bond or other type of debt whose coupon rate has an inverse relationship to a benchmark rate. An inverse floater adjusts its coupon payment as the interest rate changes. An inverse floater is also known as an inverse floating rate note or a reverse floater.
Governments and corporations are the typical issuers of these bonds, which they sell to investors in order to raise funds. Governments might use these funds to build roads and bridges, while corporations might use the funds from a bond sale to build a new factory or buy equipment.
Investors of an inverse floater will receive cash payments in the form of periodic interest payments, which will adjust in the opposite direction of the prevailing interest rate.
An inverse floater is a bond or other type of debt instrument that has a coupon rate that varies inversely with a benchmark interest rate.
Investors who purchase inverse floaters will receive interest payments that are adjusted according to changes in the current interest rates.
For an inverse floater, the interest rates the investor receives will adjust in the opposite direction of the prevailing rates; thus, when interest rates fall, the rate of the bond's payments increases.
Investors of inverse floaters face interest rate risk, which is the potential for investment losses due to changes in interest rates.
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Governments and corporations are the typical issuers of these bonds, which they sell to investors in order to raise funds. Governments might use these funds to build roads and bridges, while corporations might use the funds from a bond sale to build a new factory or buy equipment.
Investors of an inverse floater will receive cash payments in the form of periodic interest payments, which will adjust in the opposite direction of the prevailing interest rate.
An inverse floater is a bond or other type of debt instrument that has a coupon rate that varies inversely with a benchmark interest rate.
Investors who purchase inverse floaters will receive interest payments that are adjusted according to changes in the current interest rates.
For an inverse floater, the interest rates the investor receives will adjust in the opposite direction of the prevailing rates; thus, when interest rates fall, the rate of the bond's payments increases.
Investors of inverse floaters face interest rate risk, which is the potential for investment losses due to changes in interest rates.
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