An Important Difference Between a Floating-Rate Note and a Fixed-Rate

question 3

Multiple Choice

An important difference between a floating-rate note and a fixed-rate note indexed to Libor is that

• A)The return from holding a fixed-rate note over any holding period is deterministic and known because of the fixed coupon payments,whereas the similar return on a floating rate note is unknown because the coupon "floats."'
• B)The price of the floating-rate note resets to par on each coupon/reset rate,whereas that of the fixed-rate note does not necessarily do so.
• C)The price of the fixed-rate note is deterministic and known because the bond pays fixed coupons whereas the floating-rate note has a fluctuating price because it pays floating interest rates.
• D)A fixed-rate note is always worth par at issue whereas the floating-rate note may not be.

---

Definitions:

Overwhelming Sense Of Fear

An intense and overpowering feeling of fear, often sudden and without a clear cause.

Obsessive-Compulsive Disorder

A mental health disorder characterized by unreasonable thoughts and fears (obsessions) leading to compulsive behaviors.

Doubts

Feelings of uncertainty or lack of conviction about something, leading to questions or hesitations in belief or action.

Repetitive Routines

Behaviors or tasks that are performed in a consistent, unvarying manner, often as part of a daily or regular schedule.