- 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
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.
coupon rate = K - L x (reference rate) where K and L are values specified in the prospectus for the issue.
User Contributed Comments 2
| User | Comment |
|---|---|
| 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. |