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Interest Trigger Rate
The term “interest rate trigger” can refer to different things depending on the context.
In finance and investments, an interest rate trigger is a predetermined level at which an interest rate change will trigger a specific action or event. For example, in the case of an adjustable-rate mortgage, an interest rate trigger may be a specific interest rate level that, when reached, will cause the mortgage interest rate to adjust up or down.
In the context of corporate bonds, an interest rate trigger may be a provision that specifies that the bond’s interest rate will increase or decrease if a specific financial metric, such as the company’s earnings or debt-to-equity ratio, falls below or rises above a predetermined level.
Overall, an interest rate trigger is a tool that helps investors, borrowers, and lenders manage risk and uncertainty by setting predetermined thresholds for interest rate changes that may trigger specific actions or events.