Which of the following best defines a floating-rate bond?
Which of the following best defines a floating-rate bond?
[A]A bond with a fixed interest rate and has better yield than varying interest rate bond
[B]A bond with a fixed interest rate and has lower yield than varying interest rate bond
[C]A bond with a varying interest rate and has better yield than fixed interest rate bond
[D]A bond with a varying interest rate and has lower yield than fixed interest rate bond
A bond with a varying interest rate and has lower yield than fixed interest rate bond
Floating rate bonds have variable interest rate and protect investors against a rise in interest rates (which have an inverse relationship with bond prices). They also carry lower yields than fixed notes of the same maturity.