Variable-rate demand note

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Variable-rate demand note

A note that is payable on demand and bears interest tied to a money market rate.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Variable-Rate Demand Note

A debt security that a holder may require the issuer to redeem before maturity. When this occurs, the issuer must pay par to the holder, and the holder loses any future coupon payments that he/she might otherwise have been due. An advantage to a variable-rate demand note from the holder's standpoint is the fact that the holder may reinvest the par value in a new bond in a time of rising interest rates. This protects the holder from certain types of interest rate risk.

Variable-rate demand notes come in two main forms. The first allows the holder to demand redemption on any of several days throughout the life of the bond, while the second only allows this on one particular day. Variable rate demand notes are also known as variable rate demand obligations, option tender bonds, or put bonds. In Canada, the most common term is a retractable bond.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
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MADS reflects UChicago's uneven debt service requirements, including mandatory tenders on put bonds and bullet maturities.
This calculation excludes the $190 million of put bonds that have staggered mandatory tender dates in 2019 and 2020.
The proposed $375 million series 2018 bonds will be issued partially as fixed rate tax exempt bonds and fixed rate put bonds with a seven year term, both with final maturity in 2048.
These are --$811,305,000 Grand Parkway System subordinate tier toll revenue bonds, series 2018A (TELA supported); and --$100,000,000 Grand Parkway System subordinate tier toll revenue put bonds, series 2018B (TELA supported).
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