Q. Consider the following statements about the Floating Rate Bonds:
- Coupon rate is not fixed
- The Coupon rate is reset with reference to a benchmark rate
- Sold at a discount from the face value
Which among the above statements is/ are correct?
Answer:
1 & 2
Notes: Based on the information provided about Floating Rate Bonds, the statements that are correct are:
- Coupon rate is not fixed
- The Coupon rate is reset with reference to a benchmark rate
The third statement "Sold at a discount from the face value" is not necessarily correct about Floating Rate Bonds in general. Floating Rate Bonds can be sold at par, at a premium, or at a discount from face value depending on market conditions and demand. But they are not inherently sold at a discount simply by virtue of being Floating Rate Bonds.