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# On a variable rate transaction, how is the initial rate determined?

The initial rate is calculated by adding the index and margin (if applicable) taking into consideration any interest rate rounding chosen. The initial rate is subject to any floor that has been entered when the checkbox has been selected indicating the rate is subject to the floor. The initial rate must be less than the ceiling.

For example, an index rate of 3.25% plus a margin of 2.00% rounded to the .125% with a floor of 6.00% will result in an initial rate of 6.000% due to the floor being higher than the market rate of 5.25%.