Floating Rate Note

A bond whose interest payments reset periodically based on a benchmark rate.

A floating rate note, or FRN, pays a coupon that adjusts on a set schedule, tracking a reference rate such as SOFR plus a fixed spread. Because payments move with interest rates, floating rate notes carry less price sensitivity to rate changes than fixed-coupon bonds, making them popular when rates are expected to rise.

She preferred the floating rate note over a fixed bond because its coupon would rise if interest rates climbed.