Which of the Following Is the Most Common Expression of a Floating

question 26

Multiple Choice

Which of the following is the most common expression of a floating interest rate?

• A) The sum of the prime rate and a specified number of percentage points
• B) A percentage of the prime rate
• C) Spread
• D) LIBOR

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Definitions:

Fair Value Method

An accounting approach where assets and liabilities are reported at their current prices or the estimated amount they would fetch in the market.

Brokerage Fee

A charge levied by a broker for facilitating transactions between buyers and sellers.

Unrealized Gain

An increase in the value of an asset that has not been sold, hence the profit is not yet realized.

Trading Investments

Securities purchased and held primarily for selling them in the near term to generate income on short-term price differences.