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Finance

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  • March 12, 2021
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High-Low FRN

A floating rate note (FRN) which is designed as a yield enhancement instrument. It has a premium rate that is equal to a reference index rate (market rate), subject to a cap level. If the market rate increases beyond the cap rate, the note turns into a reverse floating rate note. The floating rate note’s yield decreases as the market rate appreciates.

This note is typically sought by investors who expect floating rates would only stage a modest increase over the span of the instrument.


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