question

CFA Level III
#1

When a company “issues” a bond, say a floating rate note, is it borrowing? and does that mean it’s paying or receiving the floating rate?

#2

yes it is borrowing - because someone (the public) is buying that note. they are paying a floating rate on the bond. (so Libor / Floating rate * Par value of bond is what is paid as Coupon).

#3

yes, they are issuing an IOU to someone and paying them interest for the term of the note

#4

thanks

#5

Issuer of Bond = Borrower Bondholder = Lender In your example, the issuer of the bond is paying a floating rate on the bond. The bondholder is receiving a floating rate.