Floating Rate Notes Behave Differently in Response to Interest Rate

question 84

Multiple Choice

Floating rate notes behave differently in response to interest rate risk than straight fixed-rate bonds.

• A)True since FRNs experience only mild price changes between reset dates,over which time the next period's coupon payment is fixed (assuming,of course,that the reference rate corresponds to the market rate applicable to the issuer).
• B)False since all bonds experience an inverse price change when the market rate of interest changes.
• C)all of the options
• D)none of the options

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Definitions:

Jasmonic Acid

One of a group of lipid-derived plant hormones that affect several processes, such as pollen development, root growth, fruit ripening, and senescence; also involved in defense against insect pests and disease-causing organisms.

Prostaglandins

Lipid compounds that have diverse hormone-like effects in animals, including inflammation regulation and smooth muscle contraction.

PIF3

Phytochrome Interacting Factor 3, a protein that regulates plant responses to light.

Phytochrome Signal Transduction

A biochemical pathway in plants by which light signals are converted into cellular responses, mediated by phytochrome proteins.