Economics Bonds Questions
A fixed-rate bond is a type of bond where the interest rate remains constant throughout the life of the bond. The interest payments are predetermined and do not change with market conditions.
On the other hand, a floating-rate bond is a type of bond where the interest rate is not fixed but instead fluctuates based on a reference rate, such as the LIBOR (London Interbank Offered Rate) or the prime rate. The interest payments on a floating-rate bond adjust periodically, typically every three to six months, based on changes in the reference rate.
In summary, the main difference between a fixed-rate bond and a floating-rate bond is that the interest rate on a fixed-rate bond remains constant, while the interest rate on a floating-rate bond fluctuates based on a reference rate.