Question

An obligation that has an interest rate that floats and that is reset on a daily or weekly basis, and that gives the holder the right to sell the obligation back to the issuer at the reset date, or at the final maturity date, is known as a(n):

Answer 1

Answer:

Variable rate demand obligation

Explanation:

The question is descriptive of a municipal variable rate demand obligation. Through this a municipality issues a long-term security at short-term and lower interest rates. The interest rate is reset at given period. It could be done daily. The holder can decide to put the bond back to the issuer at any of the reset date. They mature finally at a date of 10 years after issuance, and then they will be repaid.