• 9964432222
  • Mail Us
  • Appointment
  • Locate Us
  • Chat Now
  • Courses
  • Login
  • Register
Manifest IAS
JournalsOfIndia
Advertisement
  • Home
  • SNIPPETSfor Prelims
  • ARTICLESfor Mains
  • BROWSEBY SOURCE
  • DOWNLOADS
No Result
View All Result
  • Home
  • SNIPPETSfor Prelims
  • ARTICLESfor Mains
  • BROWSEBY SOURCE
  • DOWNLOADS
No Result
View All Result
JournalsOfIndia
No Result
View All Result
Home Economy

Floating Rate Bond and Other kinds of bonds

November 18, 2020
in Economy
Reading Time: 2min read
0
Floating Rate Bond and Other kinds of bonds
169
VIEWS
Share on WhatsAppShare on TelegramShare on Facebook

What are Floating Rate Bonds?

  • Floating rate bonds, also known as floating rate notes, are a type of bond characterized by floating rate of interest.
  • Unlike traditional bonds that pay a fixed rate of interest, floating-rate bonds have a variable rate that resets periodically. 
  • The frequency at which the yield of a floating rate note resets can be daily, weekly, monthly, or every three, six, or 12 months. 

Advantages and disadvantages of floating rate bonds

  • The advantage of floating-rate bonds, compared to traditional bonds, is that interest rate risk is largely removed from the equation. 
  • While an owner of a fixed-rate bond can suffer if prevailing interest rates rise, floating rate notes will pay higher yields if prevailing rates go up. 
  • As a result, they will tend to perform better than traditional bonds when interest rates are rising.
  • However, investors in floating-rate securities will receive lower income if rates fall because their yield will adjust downward. 
  • Also, investors in individual floating rate bonds lack certainty as to the future income stream of their investments.

Other kinds of bonds

  • Fixed rate bond: It is a bond that pays the same level of interest over its entire term. An investor who wants to earn a guaranteed interest rate for a specified term could purchase a fixed rate bond in the form of a Treasury, corporate bond, municipal bond, or certificate of deposit (CD)
  • Mortgage bond:This kind of a bond is secured by mortgage, or a pool of mortgages, that are typically backed by real estate holdings and real property, such as equipment
  • Zero Coupon bond: It is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.
  • Serial bond:  It is a bond issue that is structured so that a portion of the outstanding bonds mature at regular intervals until all of the bonds have matured. These bonds are used to finance projects that provide a consistent income stream for bond repayment
  • Callable/redeemable bond: It is a bond that the issuer may redeem before it reaches the stated maturity date. A callable bond allows the issuing company to pay off their debt early
  • Extendable bond: It is a long-term debt security that includes an option to lengthen its maturity period. Because these bonds contain an option to extend the maturity period, a feature that adds value to the bond, extendable bonds sell at a higher price than non-extendable bonds
Source: Investopedia & Economic Times
Tags: Prelims

Related Posts

Nurturing Neighbourhood contest

Nurturing Neighbourhood contest

February 20, 2021
One Nation-One Grid

One Nation-One Grid

February 20, 2021
Integrated Command and Control Centre- Smart cities

Integrated Command and Control Centre- Smart cities

February 20, 2021
Superconducting Magnetic Energy Storage

Superconducting Magnetic Energy Storage

February 20, 2021
Feeder Separation

Feeder Separation

February 19, 2021
Labour Bureau

Labour Bureau

February 19, 2021
Solar Energy Corporation of India

Solar Energy Corporation of India

February 19, 2021
Nurturing Neighbourhoods Challenge

Nurturing Neighbourhoods Challenge

February 19, 2021
Production Linked Incentive (PLI) Scheme for Telecom and Networking Products

Production Linked Incentive (PLI) Scheme for Telecom and Networking Products

February 18, 2021
Affordable Sustainable Housing Accelerators- India (ASHA-India)

Affordable Sustainable Housing Accelerators- India (ASHA-India)

February 18, 2021
Please login to join discussion
February 2021
MTWTFSS
1234567
891011121314
15161718192021
22232425262728
« Jan    

Browse by Category

  • Agriculture
  • Disaster Management
  • Economy
  • Environment
  • Ethics
  • Foreign Affairs
  • Geography
  • Governance
  • History
  • Law & Policy
  • Opinion
  • People in News
  • Places in News
  • Science & Tech
  • Security
  • Society

Browse by Tags

AIR Down to Earth EU g20.utoronto.ca GS-1 GS-2 GS-3 GS-4 imi3.nhp.gov.in Kurukshetra Mains News Paper PIB powergridindia.com Prelims RSTV Science Reporter Survey Yojana Zee news
JournalsOfIndia

Our vision is to orient the readers to grasp the facts objectively and analyse critically. In the rush of reaching first to the readers, the websites miss the balanced opinion, which is the need of the hour. We aim to reach the readers with more crispness, preciseness and relevance. We bring the articles in UPSC way for the civil services aspirants and the Wisest Way for general readers.

Categories

  • Agriculture
  • Disaster Management
  • Economy
  • Environment
  • Ethics
  • Foreign Affairs
  • Geography
  • Governance
  • History
  • Law & Policy
  • Opinion
  • People in News
  • Places in News
  • Science & Tech
  • Security
  • Society

Browse by Tag

AIR Down to Earth EU g20.utoronto.ca GS-1 GS-2 GS-3 GS-4 imi3.nhp.gov.in Kurukshetra Mains News Paper PIB powergridindia.com Prelims RSTV Science Reporter Survey Yojana Zee news

Newsletter

The most important UPSC news and events of the day.

Get Journals daily newsletter on your inbox.

© 2020 JournalsOfIndia - A free initiative by Manifest Team.

  • Login
  • Sign Up
  • Home
  • SNIPPETS
  • ARTICLES
  • BROWSE
  • DOWNLOADS
No Result
View All Result

© 2020 JournalsOfIndia - A free initiative by Manifest Team.

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In