What is the floating rate?
Interest rates and exchange rates are a daily part of economic life in the world. Whenever this currency is borrowed, borrowed or replaced for another type of currency, these rates come into play. These rates may be determined with a certain value or may be freely changed with market fluctuations and other changing conditions. The rate, which is regularly changed with market conditions, is called a floating rate. If the individual takes a mortgage loan on the property, he / she must decide whether the most desirable rate or floating rate is also called an adjustable rate. If interest rates are relatively high at the time of the loan, the individual would most likely benefit from the floating rate, because as interest rates dropped to a historically normal or low level, the interest rate would be reduced. This would then be handed over to the debtor who pays less money in interest for the duration of the loan.
Currency exchange courses also subject toí vnolích market. Exchange courses as such are not related to interest rates, but rather relate to the amount that one currency has in terms of another currency. If the currency value is entitled to fluctuate according to market conditions, then it is said that this currency has a floating rate or a floating exchange rate. For example, one euro may have $ 1.30 (US dollars) in a given time, and since then its value could be reduced to $ 1.24 or increased to $ 1.39 or any other value. This is because in this example there is a floating exchange rate between the US dollar and the euro.
Many economists believe that floating exchange courses are more advantageous than fixed exchange rates because they reduce the worldwide impact of economic shocks and business cycles. Fixed exchange courses may be more advantageous in certain situations, where more economic security and stability are needed, although this strategy can also lead to unintended negative results.
on financial markets can have bonds floating interest SAZbu and these are called notes on the floating rate (FRN). In most cases, FRN pays interest every three months. The interest rate changes and is recalculated for each three -month period. The interest paid by the FrNS consists of a "reference rate", a floating rate, plus a "span", a rate that remains constant. From the investor's point of view, FRN can offer more revenues compared to other bond investment strategies and also reduce the investor's transaction costs.