interest rate up, bond price increase

for floating bond holder, why rate goes up, bond price increase, no interest rate risk


Please don’t take this statement the wrong way, but… If you don’t already understand the concept of floating vs. fixed, and which side you should be on given interest rate expectations in the future, I’m afraid 1.5 days may not be enough…

Good luck!

I don’t think the bond price goes up with interest rates. Floating rate bonds should normally be at par, unless the company is in distress. It doesn’t have interest rate risk because the rate resets - higher LIBOR, higher coupon.

duration of a floating rate bond is very small, thus very little int rate risk

Uncalled for post, even though you said dont take it the wrrong way, it still contributes to making the guy not feel confident and possible score worse on the exam.

Dont worry about it, anyone has a chance in passing the exam, you will review your weak areas after the exam, there is a good chance you already know enough in other area and you will do great

good luck

Think of it this way; Duration for Float almost close to 0 = > almost no interest rate risk

Dont focus on this: increase in rates = > increase in bond price.

Best of luck, hitting ethics book now!