Floating-Rate Bond

A bond associated with inconsistent, short term interest rates that are generally related to market conditions or the interest rate index. A Floating-Rate Bond is an interest bearing security that is purchased at a particular price, however, the rate at which the bond matures is subject to change over time. Floating-Rate Bonds are purchased without any assurance that they are going to mature at an even or consistent predetermined rate schedule. Investors may get some maturity from the bond,but are not guaranteed to get the maturity that was stated when the bond was initially purchased. Historically, Floating-Rate Bonds tend to mature more satisfactorily if the interest rates are projected to increase over time according to the interest rate index. Like any investment, investors are taking a financial risk when purchasing these bonds,but there is an opportunity to make a great deal of money if the bond matures as expected. If investors are interested in purchasing this type of bond particularly, they should be aware of all the terms and rate schedules prior to making any commitment.