Fixed Versus Floating Interest Rates

This question tests whether you understand how interest rate structures affect borrowing costs in leveraged finance. You need to know how a fixed rate stays unchanged over time, while a floating rate resets with a benchmark plus a spread, and how those structures are commonly used across different debt instruments. Interviewers ask this because interest rate type affects cash flow forecasting, interest expense sensitivity, and the relative risk profile of debt tranches, all of which are important in credit analysis and capital structure discussions.