cityboy

2. A 10-year bond is issued on January 1, 2010. Its contract requires that its coupon rate change over time as shown in the following table: Coupon Payment Date Range Coupon Rate 1/1/2010-12/31/2011 2.0% 1/1/2012-12/31/2013 5.0% 1/1/2014-12/31/2015 7.5% 1/1/2016-12/31/2019 9.0% This security is best described as an example of a: A. step-up note. B. inverse floater. C. deferred coupon bond.

Ans: A; A is correct step-up notes have coupon rates that increase over time at a specified rate. The increase may take place one or more times during the life of the issue.