On a reset date, floating-rate notes:

multiple choice:

o experience very volatile price changes.

o market price will usually gravitate toward par.

o market price will usually gravitate toward par, unless the borrowers’ credit rating has declined.

o none of the options

The correct answer is letter "B" and "C": market price will usually gravitate toward par; market price will usually gravitate toward par, unless the borrowers’ credit rating has declined.

Explanation:

A floating-rate note is a debt instrument with an interest rate that floats or varies. They are also called floaters. Financial institutions and governments typically issue floaters. Floaters can protect investors because they gain more when interest rates rise, unlike fixed-rate bonds which lose value when rates rise. Then, it is said that the market price will gravitate towards par unless the borrower's credit rating declines.

answer; conceptual skills;

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