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Floating-rate note (FRN)
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.
An unsecured debt issue with an interest rate that is reset at specified intervals (usually every six months) according to a predetermined formula. Floating-rate notes usually can be redeemed at face value on certain dates at the holder's option. Floating-rate notes pay short-term interest and generally sell in the secondary market at nearly par value. Floating-rate notes are indicated in bond transaction tables in newspapers by the symbol t. Also called floater, variable-rate note. See also convertible floating-rate note, droplock bond, variable-rate demand obligation, yield curve note.