The Purpose of a Floating-Rate Bond Is To

question 32

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 adjusted to current market conditions

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Definitions:

Profit Margin

Profit margin is a financial metric that measures the percentage of profit a company retains after subtracting its costs from its revenue, reflecting the overall profitability of the business.

Equity Multiplier

A financial ratio indicating how much of a company's assets are financed by stockholder's equity, illustrating the degree of financial leverage used.

Times-Interest-Earned (TIE) Ratio

Determined by dividing earnings before interest and taxes by the interest charges. This ratio measures the extent to which operating income can decline before the firm is unable to meet its annual interest costs.

Debt Ratio

A financial ratio that measures the extent of a company’s leverage, calculated as total liabilities divided by total assets.