The Purpose of a Floating-Rate Bond Is To

question 65

Multiple Choice

The purpose of a floating-rate bond is to:

• A) save interest expense for corporate issuers.
• B) avoid making interest payments until maturity.
• C) shift the yield curve.
• D) offer rates that adjust to current market conditions.

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Definitions:

Discount Factor

A multiplier used to determine the present value of future cash flows by accounting for time and interest.

Capital Budgeting

It refers to the process by which companies evaluate and select major investment projects, considering their potential long-term profitability.

After-Tax Discount Rate

The rate of return on an investment after accounting for taxes.

Incremental Sales

The additional revenue generated from a specific business action or decision, beyond the existing sales level.