Q: Good Evening
RATE RESET PREFERRED SHARES
The interest rate on rate reset preferred shares is set every five years by adding to the spread the interest rate of the 5 years Canadian government bond.
What happens if the the 5 years government bond is set at a negative rate?
For instance, the interest rate spread on BAM.PR.Z is 2.96%.
On December 31, 2022 a new interest rate will be set for BAM.PR.Z. Lets assume that the interest rate on the 5 years Government bond is negative on December 31, 2022 at -.5 %.
Will the new rate on BAM.PR.Z be 2.46% (2.96 minus .5) or will be set at 2.96% ??
Thank you for your help during these difficult times.
RATE RESET PREFERRED SHARES
The interest rate on rate reset preferred shares is set every five years by adding to the spread the interest rate of the 5 years Canadian government bond.
What happens if the the 5 years government bond is set at a negative rate?
For instance, the interest rate spread on BAM.PR.Z is 2.96%.
On December 31, 2022 a new interest rate will be set for BAM.PR.Z. Lets assume that the interest rate on the 5 years Government bond is negative on December 31, 2022 at -.5 %.
Will the new rate on BAM.PR.Z be 2.46% (2.96 minus .5) or will be set at 2.96% ??
Thank you for your help during these difficult times.