Interest Rate
The rate expressed as a percentage of the principal amount of a bond used to determine the amount of interest to be paid by the issuer or the borrower.
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Interest Rate Swap
A type of derivative, in which the Interest Rate on the Bonds is swapped, or exchanged, by the Issuer for an agreed-upon Fixed Rate or Variable Rate based upon an index, calculated on a notional principal amount. The payments are generally netted against each other, with the party owing the greater amount paying the other on a periodic basis. The swap is not a debt instrument, and the notional principal amount is not a payment obligation, but merely the vehicle for calculating swapped payments.
See Also
Fixed Interest Rate
An interest rate which is set at the time a bond is issued and which does not vary during the term of the bond.
Variable Interest Rate
The interest rate on a bond which varies according to a formula set forth in the bond or the indenture or bond resolution/ordinance or based on the interest rate required by a remarketing agent to remarket the bonds at par.
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Closing Memorandum
A narrative form of, or adjunct to, the closing index describing the participants, their roles in the financing, flow of funds on the date of the closing, closing instructions and the documents for which the transaction participants are responsible.