Business and Personal Finance Dictionary

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• FLOATING RATE
  
  A debt security whose interest rate is adjusted on a regular schedule to reflect changing money market rates is said to have a floating rate. These securities, typically five-year notes, are offered at a rate lower than comparable fixed-rate notes but help protect against declining prices in a period of rising interest rates. When a nations currency moves up and down in value against the currency of another nation, the relationship between the two is described as a floating exchange rate. For example, the US dollar is worth more Japanese yen in some periods and less in others. That movement is usually the result of whats happening in the economy of each of the nations and in the economies of their trading partners. A fixed exchange rate, on the other hand, means that two (or more) currencies, such as the US dollar and the Bermuda dollar, always have the same relative value.
  
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