- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 42. Fixed-Income Securities: Defining Elements
- Subject 4. Structure of a Bond's Cash Flows

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**CFA Practice Question**

The coupon formula for an inverse floater is ______.

A. coupon rate = K - L x (reference rate), where K and L are values specified in the prospectus for the issue

B. coupon rate - K = L x (reference rate), where K and L are values specified in the prospectus for the issue

C. coupon rate = K + L x (reference rate), where K and L are values specified in the prospectus for the issue

**Explanation:**The coupon formula for an inverse floater is:

coupon rate = K - L x (reference rate) where K and L are values specified in the prospectus for the issue.

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**User Contributed Comments**
2

User |
Comment |
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o123 |
*just find a forumla that depicts an inverse relationship between the coupon and the reference rate. |

akirchner1 |
Also, B and C are the same formula; K is just on different sides of the equation. By default, you would choose A. |