Discuss GARP 2016-FRR Exam Topic 1 Question 23

Which one of the following four statements regarding floating rate bonds is incorrect?

AFloating rate bonds have coupon payments tied to floating interest rates or floating interest rate indexes.

BFloating rate bonds typically have less price risk than fixed rate bonds.

CFloating rate bonds are very sensitive to changes in interest rates.

DFloating rate bonds only have a small degree of interest rate risk.

Suggested Answer: C

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21 comments · newest first

Tawna 2 days ago

Right! B is true, less price risk.

Fredric 7 days ago

C suggests high sensitivity, but they’re less risky.

Arthur 12 days ago

I agree, C seems off.

Louisa 17 days ago

I think option C is incorrect.

Annabelle 23 days ago

Yes, definitely! C feels the most incorrect.

Elvera 28 days ago

So, we lean towards C as the answer?

Cecily 1 month ago

Exactly! Floating rates adjust, so less sensitivity.

Leota 1 month ago

Right, but C really stands out as wrong.

Annabelle 1 month ago

True, D could be misleading. They still have some risk.

Elvera 2 months ago

But isn't D also questionable? Small degree of risk?

Cecily 2 months ago

I agree, C seems off. They aren't that sensitive.

Leota 2 months ago

I think option C is incorrect.

Avery 2 months ago

Definitely B) is correct, floating rates are safer!

Shayne 2 months ago

Wait, D) sounds wrong, how can they have only a small degree of risk?

Alethea 2 months ago

C) seems off, they shouldn't be that sensitive.

Johanna 3 months ago

I agree, B) makes sense, less price risk is a plus!

Nilsa 3 months ago

A) is totally true, floating rates are linked to indexes.

Marti 3 months ago

I feel like I’ve seen something similar before, and I think the incorrect statement might be D. Floating rate bonds still have interest rate risk, just less than fixed ones.

Lynna 3 months ago

I’m a bit confused about C and D. I thought floating rate bonds were sensitive to interest rate changes, but D says they only have a small degree of risk, which seems contradictory.

Olga 3 months ago

I think I saw a practice question where it mentioned that floating rate bonds have less price risk, which makes me lean towards B being true.

Rosio 4 months ago

I remember studying that floating rate bonds adjust their coupons based on interest rates, so A seems correct.

GARP 2016-FRR Exam - Topic 1 Question 23 Discussion