Drop Lock

DEFINITION of 'Drop Lock'

An arrangement whereby the interest rate on a floating rate note or preferred stock becomes fixed if it falls to a specified level.

BREAKING DOWN 'Drop Lock'

If a country had a floating exchange rate and a currency that suddenly dropped, the drop lock would fix the exchange rate once it hit a certain level.

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RELATED FAQS
  1. What does floating stock tell traders about a particular stock?

    Learn about what floating stock tells a trader about a particular stock. One commonality of the biggest winners in stock ... Read Answer >>
  2. Which of the following strategies is (are) appropriate? I. If a borrower has a fixed ...

    The correct answer is: a) (II) is incorrect because if an investor has floating rate assets and is expecting interest rates ... Read Answer >>
  3. Why does float usually increase at the beginning of the week?

    Find out more about float and how checking float is created in the American banking system. Learn more about why the Federal ... Read Answer >>
  4. How does float affect the nation's money supply?

    Learn how float affects the appearance of the nation's money supply, and receive a brief lesson on how the U.S. government ... Read Answer >>
  5. What months of the year typically have the highest float?

    Learn more about how float occurs within the United States and how it is monitored. Find out why float frequently happens ... Read Answer >>
  6. What is the difference between holdover float and transportation float?

    Find out about float, which may become a thing of the past due to the steady decline of check writing and new services in ... Read Answer >>
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