Floating-Rate Note - FRN

Floating-Rate Note - FRN

A note with a variable interest rate. The adjustments to the interest rate are usually made every six months and are tied to a certain money-market index. Also known as a "floater".

Notes:

These protect investors against a rise in interest rates (which have an inverse relationship with bond prices), but also carry lower yields than fixed notes of the same maturity. It's essentially the same concept as a adjustable-rate mortgage, except FRNs are investments (not debt).

See also: Adjustable-Rate Mortgage - ARM, Debt Security, Fixed-Income Security, Fixed Interest Rate, Floater, Note, Variable Interest Rate, Yield