- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 44. Introduction to Fixed-Income Valuation
- Subject 6. Yield Measures for Floating-Rate Notes and Money Market Instruments
CFA Practice Question
Between coupon dates, if LIBOR goes down, the flat price of a floater will ______ (assuming there's no credit risk change).
A. go up
B. remain the same
C. go down
Explanation: However, if the required margin remains the same as the quoted margin, the flat price will be pulled to par as the next reset date nears.
User Contributed Comments 3
| User | Comment |
|---|---|
| raywen8 | I don't get it. Shouldn't it go down? Can anyone please explain? |
| Batoold89 | The key here is " between coupon dates" , on the coupon date is a different thing |
| bryce_81 | If libor goes down, then your overall yield will also go down. The inverse relation with price would cause the price to rise. |