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 ?
A weekly high-grade market index composed of seven-day tax-exempt variable-rate demand notes (VRDNs), known as the SIFMA index, has increased steadily from yields of 0.01 percent at the beginning of 2016 to as high as 0.87 percent on October 3, 2016.
10 June 2011 - S&P on Thursday gave its A+/A-1 rating to the USD7.515m (EUR5.180m) variable-rate demand notes series 2011 of US investment and project management firm Vulcan Inc.
There were $375 billion of so-called variable-rate demand notes outstanding, according to the Securities Industry and Financial Markets Association, of which.

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