Floating Rate Note
Floating rate notes (FRNs) are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a quoted spread (a.k.a. quoted margin). The spread is a rate that remains constant. Almost all FRNs have quarterly coupons, i.e. they pay out interest every three months, though counter examples do exist. At the beginning of each coupon period, the coupon is calculated by taking the fixing of the reference rate for that day and adding the spread. A typical coupon would look like 3 months USD LIBOR +0.20%.
Read more about Floating Rate Note: Issuers, Variations, Risk, Trading, Simple Margin
Famous quotes containing the words floating, rate and/or note:
“Gradually the village murmur subsided, and we seemed to be embarked on the placid current of our dreams, floating from past to future as silently as one awakes to fresh morning or evening thoughts.”
—Henry David Thoreau (1817–1862)
“Unless a group of workers know their work is under surveillance, that they are being rated as fairly as human beings, with the fallibility that goes with human judgment, can rate them, and that at least an attempt is made to measure their worth to an organization in relative terms, they are likely to sink back on length of service as the sole reason for retention and promotion.”
—Mary Barnett Gilson (1877–?)
“Return our hymn,
like echo fling
a sweet song,
answering note for note.”
—Hilda Doolittle (1886–1961)