A floating-rate note that allows its initially quoted LIBOR spread of 1.5% to be changed on a semiannual basis during the life of the note is an example of a: a. Dual-indexed floater. b. Inverse floater. c. Deleveraged floater. d. Stepped spread floater.
Deleveraged Floater - A fixed-income investment with a floating rate tied to a specific index with less than a one for one payback ratio. Inverse Floater - A bond or other type of debt whose coupon rate has an inverse relationship to short-term interest rates Dual indexed floater doesnt sound exact to me. Is it D? Stepped spread floater?
wow… how would this work? what would the changing LIBOR spread be based on???
not good raghuram_86, I was expecting an answer E (below) to this question and you’ve disappointed me. E) Crap Question, Move on… Guys, is this on L1-syllabus? - Dinesh S
i’ve NEVER heard of this stuff before… so i hope its not in the syllabus hehe but yes, now that you mention it, i’m sure the answer is E
out of interest dinesh what is the answer? i will really kick myself if it does come up in the exam!
cielito, the correct answer is D (Stepped spread floater)
thanks!
haha!!! my luck favoured me for once 
I believe that the spread usually just increases based on the terms of the note (e.g., going from 1.5 -> 3 over the term of the note). Obviously, all things are possible (e.g., reset each November first at 1 + Red Sox victories Mod 50.
we did learn about stepped floating or something like that… i’d choose D cuz thats the only thing i recognize
I’ll drop a floater just like this into the toilet.