Redemption

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Redemption

Repayment of a debt security or preferred stock issue, at or before maturity, at par or at a premium price.

Redemption

1. In bonds, the act of an issuer repurchasing a bond at or before maturity. Redemption is made at the face value of the bond unless it occurs before maturity, in which case the bond is bought back at a premium to compensate for lost interest. The issuer has the right to redeem the bond at any time, although the earlier the redemption take place, the higher the premium usually is. This provides an incentive for companies to do this as rarely as possible.

2. The act of the issuing company repurchasing stocks or mutual funds. In the case of mutual funds, the repurchase is made at net asset value per share. Stocks may be redeemed in cash or by proration. See also: Proratable factor.

redemption

The retirement of a security by repurchase. Although generally used in reference to the repurchase of a bond before maturity, the term also applies to stock and mutual fund shares. See also partial redemption.

Redemption.

When a fixed-income investment matures, and you get your investment amount back, the repayment is known as redemption.

Bonds are usually redeemed at par, or face value, traditionally $1,000 per bond. However, if a bond issuer calls the bond, or pays it off before maturity, you may be paid a premium, or a certain dollar amount over par, to compensate you for lost interest.

You can redeem, or liquidate, open-end mutual fund shares at any time. The fund buys them back at their net asset value (NAV), which is the dollar value of one share in the fund.

References in periodicals archive ?
The redemption is not essentially equivalent to a dividend.
In such circumstances, a CPA can recommend a stock redemption as a way to equalize the property settlement between spouses.
Any of the Preferred Securities called for redemption and not converted on or before 5:00 p.
When a plan participant left employment, the ESOP redeemed convertible preferred stock equal in value to the participant's vested account, regardless of any election by the participant on the ultimate distribution of the account balance (Boise Cascade decided whether the redemption was to be in cash or common stock).
If a shareholder sells all his or her stock and completely terminates ownership of the corporation, the redemption is treated as an exchange.
302's requirements can avoid recharacterizing a stock redemption from a capital transaction to a dividend.
302(b)(1)--(4) applies, the redemption "shall be treated as a distribution in part or full payment in exchange for the stock.
The final regulations are effective for redemptions occurring on or after Jan.
A combination agreement has characteristics of both a redemption agreement and a cross-purchase agreement.
356 test of the final regulations difficult to apply with certainty for pre-reorganization redemptions or distributions.
Read, therefore, makes redemptions that qualify under Sec.
However, the Senate Committee Report stated that the provision applies to all redemptions, not just hostile situations The Conference Committee Report also stated:"The conferees wish to clarify that, while the phrase 'in connection with [a] redemption' is intended to be construed broadly, the provision is not intended to deny a deduction for otherwise deductible amounts paid in a transaction that has no nexus with the redemption other than being proximate in time or arising out of the same general circumstances.