Difference Between Fixed and Floating Rate Bonds
Unlike a fixed-rate bond, a floating rate note is a type of bond that contains a variable coupon that is equal to a money market reference rate, or a federal funds rate plus a specified spread. Although the spread remains constant, the majority of floating rate notes contains quarterly coupons that pay-out interest every 3 months with variable percentage returns. At the beginning of each coupon period, the rate is calculated by adding the spread with the reference rate. This structure differs from the fixed-bond rate which locks in a coupon rate and delivers it to the holder over semi-annually over a course of multiple years.
Read more about this topic: Fixed Rate Bond
Famous quotes containing the words difference between, difference, fixed, floating, rate and/or bonds:
“The difference between a Republican and a Democrat is the Democrat is a cannibal—they have to live off each other—while the Republicans, why, they live off the Democrats.”
—Will Rogers (1879–1935)
““Great difference between me and white man.””
—Henry David Thoreau (1817–1862)
“The whole point about the true unconscious is that it is all the time moving forward, beyond the range of its own fixed laws or habits. It is no good trying to superimpose an ideal nature upon the unconscious.”
—D.H. (David Herbert)
“The structure was designed by an old sea captain who believed that the world would end in a flood. He built a home in the traditional shape of the Ark, inverted, with the roof forming the hull of the proposed vessel. The builder expected that the deluge would cause the house to topple and then reverse itself, floating away on its roof until it should land on some new Ararat.”
—For the State of New Jersey, U.S. public relief program (1935-1943)
“Writing a book I have found to be like building a house. A man forms a plan, and collects materials. He thinks he has enough to raise a large and stately edifice; but after he has arranged, compacted and polished, his work turns out to be a very small performance. The authour however like the builder, knows how much labour his work has cost him; and therefore estimates it at a higher rate than other people think it deserves,”
—James Boswell (1740–1795)
“Oh! I have slipped the surly bonds of earth,
And danced the skies on laughter-silvered wings ...
And while with silent lifting mind I’ve trod
The high, untrespassed sanctity of space,
Put out my hand and touched the face of God.”
—John Gillespie Magee (c. 1922–1941)