Asked by Eunice Monpremier on Jul 15, 2024
Verified
Your neighbour is bragging that the coupon payment on the bonds he bought five years ago has increased in each of the last three years. You know he must own _______________.
A) A zero-coupon bond.
B) An income bond.
C) A convertible bond.
D) A put bond.
E) A floating rate bond.
Floating Rate Bond
A bond with an interest rate that is tied to a benchmark, such as LIBOR, and can change over time.
Coupon Payment
A periodic interest payment made to bondholders during the life of a bond.
Income Bond
A type of bond that only pays interest if the issuer has sufficient earnings to cover the interest payments.
- Study the unique qualities of particular bonds, namely callable, convertible, and zero-coupon bonds.
Verified Answer
KE
khate estradaJul 18, 2024
Final Answer :
E
Explanation :
A floating rate bond has a variable interest rate, which means the coupon payment can change over time, typically in response to changes in benchmark interest rates. This is why the coupon payment on the bonds the neighbour bought could have increased in each of the last three years.
Learning Objectives
- Study the unique qualities of particular bonds, namely callable, convertible, and zero-coupon bonds.