Floating-Rate Note (FRN)
A note with a variable interest rate. The adjustments to the interest rate are usually made every six months and are tied to a certain money-market index. Also known as a "floater". Investopedia Says:
These protect investors against a rise in interest rates (which have an inverse relationship with bond prices), but also carry lower yields than fixed notes of the same maturity. It's essentially the same concept as a adjustable-rate mortgage, except FRNs are investments (not debt). Related Terms:
Adjustable-Rate Mortgage - ARM
Debt Security
Fixed Interest Rate
Fixed-Income Security
Floater
Interest Rate Floor
Note
Reference Rate
Variable Interest Rate
Variable Rate Demand Note |