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  • January 17, 2022
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Minimum Payoff Range Accrual Note

A range accrual note in which the investor receives a floating rate accrual coupon within a predetermined range. If the floating rate slides outside the range, the investor gets a smaller fixed coupon. For example, a 2-year note issued by a triple-A rate firm at an issue price of 100%. It will pay a coupon if the daily close of 3-month LIBOR lies within the range of 5-7%, in which case the coupon will accrue on a daily basis at 3-month LIBOR plus a given spread (say 50 basis points). And if the 3-month LIBOR slides outside the range, coupon will accrue on a daily basis at a 1.75% fixed rate (constituting the minimum payoff).


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