An guaranteed investment instrument whose interest payment is tied to some variable (floating) interest rate benchmark, such as a specific-maturity Treasury yield.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
A pension plan purchased through a bank or an insurance company for a lump sum where the principal is guaranteed by the issuer and where the payoff varies according to a variable interest rate. One may receive payments from a floating-rate contract either in installments or as a lump sum after retirement. A floating-rate contract provides the pensioner with a small interest rate that may change and is not guaranteed, but the fact that the principal is guaranteed makes it a relatively low-risk investment. A floating-rate contract is a type of guaranteed investment contract.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved