Investment risk
Investment risk

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Investment risk

3.4 Variability of income

This applies to investments where the return is defined in generic terms but the actual amount of the return may fluctuate in an unpredictable manner. As we have seen, the most obvious example is the company share, but there are others, such as debt instruments (such as many bank deposits) where there is a contractual right to interest but the interest rate fluctuates according to some formula – or even simply at the whim of the bank! An important example of this type of security is the Floating Rate Note, a type of bond with a variable interest rate that is periodically readjusted to short-term (three- or six-month) money-market deposit rates.


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