Floating-Rate Notes (FRN)

question 83

Multiple Choice

Floating-rate notes (FRN)

• A)experience very volatile price changes between reset dates.
• B)are typically medium-term bonds with coupon payments indexed to some reference rate (e.g.,LIBOR).
• C)appeal to investors with strong need to preserve the principal value of the investment should they need to liquidate prior to the maturity of the bonds.
• D)are typically medium-term bonds with coupon payments indexed to some reference rate (e.g.,LIBOR),and appeal to investors with strong need to preserve the principal value of the investment should they need to liquidate prior to the maturity of the bonds.

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Definitions:

Income Summary Account

The income summary account is a temporary account used during the closing process to summarize the period's revenues and expenses before transferring the net income or loss to the owner's equity account.

Capital

Resources or assets that are used by a business to generate income and wealth over time, often referred to as the net worth of the business.

Revenue

The overall income obtained through the sales of products or services, which are integral to a company's principal operations.

Depreciation Expense

The allocated amount of an asset's cost expensed over its useful life to account for its decrease in value.