Asked by Joshua Najera on Jun 25, 2024
Verified
All else the same, if interest rates fall, coupon payments on floating rate bonds will fall.
Interest Rates
The rate at which a borrower pays interest to a lender for borrowing money.
Coupon Payments
Regular interest payments made to bondholders during the lifetime of the bond.
Floating Rate Bonds
Bonds with interest rates that adjust periodically based on a reference rate.
- Comprehend the impact of varying interest rates on the valuation of bonds and their associated payments.
Verified Answer
HK
Harshit KothariJun 28, 2024
Final Answer :
True
Explanation :
Floating rate bonds have variable interest payments that are tied to a benchmark interest rate. When interest rates fall, the coupon payments on these bonds adjust downward accordingly.
Learning Objectives
- Comprehend the impact of varying interest rates on the valuation of bonds and their associated payments.