The interest rate pricing of debt with floating interest rates is typically expressed in two parts: Unlike fixed interest rates, which remain constant throughout the entire duration of the borrowing, floating interest rates fluctuate based on the prevailing economic conditions. The interest rate attached to debt is defined as the amount charged to the borrower by the lender periodically throughout the borrowing term and is expressed as a percentage of the outstanding loan amount. How to Calculate Floating Interest Rate (Step-by-Step)Ī floating interest rate, often called a “variable rate”, is when a debt instrument is priced at a rate contingent on an underlying benchmark. ![]() A Floating Interest Rate refers to when the pricing on debt is variable and fluctuates over the borrowing term due to the interest rate being tied to an underlying index.
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