bond-basics

Capital Appreciation Bonds (“CABs”)

Bonds that pay no Interest until the Maturity Date. In lieu of paying Interest on regularly scheduled dates prior to the Maturity Date, the Interest on the Bonds is treated as accreting, or accumulating, periodically, and gets added to the Bonds’ Principal amount until the Bonds reach their Par Value at their Maturity Date. Accordingly, CABs are priced at a substantial discount from their Principal amount.


See Also

Maturity Date

The date upon which the principal of a bond becomes due and payable to the bond owner.

Interest

The amount of compensation for the use of borrowed money paid to the bondholders by the issuer or the borrower.

Bullet Maturity

A single, fixed principal payment at maturity with no mandatory sinking fund redemption feature.

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Hundreds of Terms and Concepts

Issue Price

A term defined in the Code and generally meaning, depending on the context, the dollar price at which a maturity of a bond issue or all of the bond issue was offered to the public by the underwriter.