A
bond with a
variable interest rate. These bonds typically have
coupons renewable every three months and pay according to a set calculation. For example, a note may have an interest rate of "
EURIBOR + 1%" and pay whatever the EURIBOR rate happens to be at the time plus 1%. Some FRNs have maximum and minimum interest rates, known as capped FRNs and floored FRNs, respectively. An FRN with both a maximum and a minimum interest rate is called a collared FRN. In the United States,
government sponsored enterprises issue most FRNs while
banks do the same in Europe. See also:
Adjustable-rate mortgage.