An Analyst Evaluates the Following Information Relating to Floating Rate

question 36

Multiple Choice

An analyst evaluates the following information relating to floating rate notes (FRns) is- sued at par value that have 3-month libor as a reference rate: $\begin{array} { l c c } \hline \text { Floating Rate Note } & \text { Quoted Margin } & \text { Discount Margin } \\\hline \mathrm { X } & 0.40 \% & 0.32 \% \\\mathrm { Y } & 0.45 \% & 0.45 \% \\\mathrm { Z } & 0.55 \% & 0.72 \% \\\hline\end{array}$ based only on the information provided, the FRn that will be priced at a premium on the next reset date is:

• A) FRn x.
• B) FRn Y.
• C) FRn Z.

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Definitions:

Income From Operations

Another term for operating income, representing profit from a company's regular business activities but excluding extraordinary items and expenses like taxes and interest.

Service Department Charges

Expenses allocated to the production or service departments, originating from support departments for costs incurred.

Operating Expenses

Costs associated with the normal operations of a business, excluding the costs of goods sold, such as rent, utilities, and payroll.

Total Service Department Charges

The collective costs charged by service departments within an organization for their services to other departments.