LEVERAGED FLOATER

A security, usually a bond, that has a leverage factor of more than one and a fixed margin with a variable coupon rate. This is tied to a benchmark interest rate or index. In general, some of the benchmark interest rate or index are well-known and widely quoted, i.e. federal funds rate, treasury rate, or London Interbank Offered Rate. It has a floating-rate note; the amount is greater than the associated benchmark rate or index.

To compute the coupon rate of a leveraged floater, multiply the benchmark interest rate by leverage factor, then add the fixed margin. This is also used to find out the coupon rate of a deleveraged floater, but pertains only to the leverage factor that can be distinguished from the other.

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