FRN Sucks Customer Reviews and Feedback

From Everything.Sucks

Floating rate notes (FRNs) are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a quoted spread (also known as quoted margin). The spread is a rate that remains constant. Almost all FRNs have quarterly coupons, i.e. they pay out interest every three months. At the beginning of each coupon period, the coupon is calculated by taking the fixing of the reference rate for that day and adding the spread. A typical coupon would look like 3 months USD LIBOR +0.20%.

Eric Reed for smart asset mentioned the cons of FRNs, "The disadvantages of FRNs include: A potentially lower rate of return compared with fixed rate notes if benchmark rates fall during the lifetime of the instrument. Generally lower rates of return given the short-term nature of the instrument. The potential for non-payment, most specifically when dealing with private institutions"


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