Floating Rate

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Floating Rate

Interest rate that is reset periodically, usually every couple of months or sometimes daily.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Floating Rate

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Floating rate.

A debt security or corporate preferred stock whose interest rate is adjusted periodically to reflect changing money market rates is known as a floating rate instrument.

These securities, for example five-year notes, are initially offered with an interest rate that is slightly below the rate being paid on comparable fixed-rate securities.

But because the rate is adjusted from time to time, its market price generally remains very close to the offering price, or par.

When a nation's currency moves up and down in value against the currency of another nation, the relationship between the two is described as a floating exchange rate.

For example, the US dollar is worth more Japanese yen in some periods and less in others. That movement is usually the result of what's happening in the economy of each of the nations and in the economies of their trading partners.

A fixed exchange rate, on the other hand, means that two (or more) currencies, such as the US dollar and the Bermuda dollar, always have the same relative value.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

floating rate

A loan interest rate that is not fixed and does not have specified times for increase or decrease,but which floats and changes as the index changes.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
KARACHI -- The government has decided to issue Pakistan Investment Bonds (PIBs) with floating rates.
As a result of this HFCs were requiring borrowers to pay a foreclosure penalty of 2% on dual rate loans even when they were repaid after the switchover to floating rates. ""Feedback was received by NHB about the features of the dual/special rate products offered by the HFCs and their relative interest rate structures.
The lack of uniformity has been observed across the industry as also by the same lending instutitons at diferent times, including the relative periods of fixed v/s floating rates in the dual rate loans.
I would not switch all my holdings from fixed income into floating rate products; that's too bullish of a call on floating rates.
So a discussion of floating rate securities can't come soon enough.
Of the $429 million of notes sold, $413 million bear interest at floating rates and $17 million at fixed rates.
The non-mark-to-market, non-recourse notes sold represent a financing with a cash cost of 5.52% for the fixed rate notes and LIBOR plus 0.43% for the floating rate notes.
Using this feature, borrowers can opt for low short-term floating rates to maximize cash flows early in the life of a mortgage, lock in a fixed rate upfront for the remainder of the term in order to eliminate the risk of rising rates and use up to an additional year of floating-rate debt at the end of the loan to arrange an exit strategy.
The final floating rate will be set at a fixed spread, currently 250 basis points above the prevailing one-month Reference Bill rate when the loan moves into the final floating-rate period.
"We're not in the business of forecasting interest rates and there's a limited amount of risk we're willing to accept," he continued." Our goal is to match liabilities and assets, and the way for us to get there is to swap out floating rates for fixed rates.
The first two are a fixed rate loan at 5%, or a floating rate note with an interest rate of 6-month LIBOR plus 1.5%.
But, if rates fall, the LOWAR rate will adjust lower, similar to a conventional floating rate. Prepayment penalties under this option are moderated as well.