medium · Debt Capital Markets bond-instruments-structures
A floating-rate note (FRN) is currently trading at 98.50 with a quoted margin of SOFR + 100 bps.
If the credit quality of the issuer remains stable but the reference rate increases by 200 bps, how will the price of the FRN typically respond?
- The price will increase to par (100.00).
- The price will fall to 96.50.
- The price will decrease significantly by approximately 10 points.
- The price will remain relatively stable near 98.50.
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