CFA Practice Question

There are 490 practice questions for this study session.

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.
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