Adjustable rate

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Adjustable rate

Applies mainly to convertible securities. Refers to interest rate or dividend that is adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution, such as that prevailing on Treasury bonds or notes. Typically, such issues have a set floor or ceiling, called caps and collars that limits the adjustment.

Adjustable Rate

An interest rate on a loan or convertible security that changes periodically. For example, an adjustable rate mortgage has a certain interest rate that changes with varying frequency. The frequency of the change is called the adjustment rate. Usually, the adjustable rate is set according to some outside benchmark; for example, a loan might set the interest rate at LIBOR + 1%. An advantage of adjustable rate loans is the fact that one's interest rate might fall over time; this is a particular advantage if prevailing interest rates are high at the time of the loan. A disadvantage to adjustable rates is the uncertainty associated with them: one's payments on the loan generally rise or fall.
References in periodicals archive ?
The 10-year term loan carried an adjustable interest rate of 3.
To narrow the current account deficit and reduce inflation, the central bank has employed a policy mix since late 2010 based on daily liquidity injections, an adjustable interest rate corridor - the gap between the overnight borrowing and lending rates - and a low policy rate.
His recommendations include the reinstatement of usury laws to limit credit card and adjustable interest rate mortgages.
The minimum household income first-time buyers needed to purchase a median-priced home at $478,710 in California in the third quarter of 2006 was $98,890, based on an adjustable interest rate of 6.
These folks are now confronting a quandary--even if they convert to a [low] fixable rate now, they'll pay a little more than they did with the adjustable interest rate," Kellner said.
The adjustable interest rate, a percentage point or two over prime, is charged only on the amount withdrawn a nice fit with remodeling's periodic, unpredictable cash needs.
Now any newly established home equity line with an adjustable interest rate must carry a rate ceiling.
The financing was provided through a savings bank at a 75 percent loan-to-value ratio, with an adjustable interest rate starting at 5.

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