Adjustable rate

(redirected from Variable-Rates)

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 ?
NEW YORK -- In a newly released health care special report, Fitch Ratings provides analysis on a new variable-rates financing structure recently utilized by the University of Pittsburgh Medical Center.
In November 2005, the University of Pittsburgh Medical Center (UPMC) and its investment banker Goldman Sachs debuted an alternative tax-exempt variable-rate security called Extendible Municipal Bonds, or X-Tenders.
However, as floating-rate debt makes up a larger portion of their overall capital structure, many health care borrowers have seen the need to diversify their variable-rate liability through the use of differing variable-rate structures.

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