CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

A floater is priced at par value on a rate reset date. Assume Standard & Poor's changed the bond's credit rating from A to AA before the next rate reset date. This will cause the floater's price to be ______.
A. at a discount below par value
B. at a premium over par value
C. the same as the par value
Explanation: The required margin will go down in this case.

User Contributed Comments 1

User Comment
Arusik Didn't get why the required margin will go down.
I always thought the market demands higher required spread after downgrade
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