True or False: Floating Rate Notes Behave Differently in Response

question 60

Multiple Choice

True or false: 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)None of the above

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Definitions:

Costochondral Joint

The Costochondral Joint refers to the area where a rib and the cartilage attach, allowing for slight movement and contributing to the chest's elasticity.

Stylomandibular Ligament

A band of fibrous tissue that extends from the styloid process of the temporal bone to the mandible, assisting in the support of the jaw.

Zygomatic Arch

The bony arch on the side of the skull forming the prominence of the cheek, connecting the zygomatic bone to the temporal bone.

Temporomandibular Joint

The hinge joint that connects the jaw to the temporal bones of the skull, allowing movement for chewing and talking.