Floating Rate Notes

The Floating Rate Notes that are listed on the ASX are more commonly known in the market place as income securities.

Firstly these securities pay a variable rate of interest in which the rate is reset according to the payment period.

What does a variable rate mean and how does it affect my income?

A variable rate,  indicates that the return you are expecting to receive moves in line with the general level of interest rates.

How is the variable rate calculated?

Your return is calculated as the base rate (risk free rate) plus a premium (extra interest) for the extra risk you are taking on board for investing in a particular company.

What is a base rate?

A base rate is an indicator.  One such rate is the Bank Bill Swap Rate (BBSW). 

Face Value back at maturity

In the case of a security being perpetual, you may ask "how do I get my face value back i.e. my  money back?" With a perpetual security or long dated if you didn't want to hold until maturity you can sell the securities on market i.e. through the ASX.