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Floating rate notes

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Published: 4th March 2010 by William Webster


A bond is a long term debt obligation. It is sold by the borrower who is called the "issuer" in order to borrow money for the medium and long term. Typically a bond will have a maturity of between 2 and 20 years. The issuer can be a bank, company or government institution. A bond normally has a known maturity or redemption date and during its life pays the investor interest. The interest payments are called "coupons". Bond investors rank prior to equity holders in liquidation but are subordinate to secured lenders. From an issuer's perspective the coupons are usually tax deductible (unlike dividend payments on equity). Bond markets provide investors with variety. One of the most frequently issued bonds is called a floating rate note.

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