A Floating Rate Note (FRN) is a type of debt security that has a variable interest rate, meaning its interest payments adjust periodically based on changes in a reference interest rate or index, such as the LIBOR, SOFR, or other benchmark rates. Unlike fixed-rate bonds, which pay a constant interest rate throughout their life, the interest payments on FRNs increase or decrease in response to changes in the chosen reference rate, providing an advantage during periods of rising interest rates.

For example, if an FRN has an interest rate set as 'SOFR + 0.5%', and SOFR is 3.5%, then the FRN pays an interest rate of 4.0%. If the SOFR increases to 4.0%, the FRN's interest payment adjusts to 4.5%, thus reflecting the change in market rates.

Floating Rate Notes are commonly used by investors who seek to reduce interest rate risk in their bond portfolios and are often issued by governments, financial institutions, or corporations. These instruments are considered attractive during economic conditions where interest rates are rising. However, their yield may be less predictable due to the adjustable nature of their payments, as opposed to fixed-rate securities, which provide stable and predictable returns.