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Extended redemption penalty |
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Extended redemption penaltyThis is where the redemption penalty continues beyond a fixed or capped rate period, effectively tying you in to the much higher variable rate for a period of time after the fixed or capped period. As a result you get stuck paying an uncompetitive rate that eats into the gains you may have made from having the fixed rate or capped ratein the first place.Extended redemption penalty Similar MatchesRedemption priceRedemption priceSee: Call price Right of redemptionRight of redemptionThe right to recover property forfeited by foreclosure by paying the outstanding principal owed plus interest. Redemption feesRedemption feesFees imposed by a mutual fund on shareholders who dispose of shares within a relatively short period after purchase. Redemption feeRedemption feeA fee some mutual funds charge when an investor sells shares within a specified short period of time. Redemption yieldRedemption yieldYield calculations on bonds aim to show the return on a gilt or bond as a percentage of either its nominal value or its current price. There are three types of yield calculation that are commonly used:Nominal YieldThis is calculated by dividing the annual income on the bond by its nominal or 'par' value. So the nominal yield on a £100 bond which pays 5% interest per year is 5/100 x 100 = 5%.Current or 'Running Yield'This is calculated by dividing the annual income on the bond by its current market price. So if the market price of the £100 bond dropped to £95, the current yield on the bond at that time would be 5/95 x 100 = 5.36%. Note that as the market price of a bond drops, its yield goes up.Redemption Yield'The Redemption Yield shows what the total return on a bond would be if held to its maturity date. It reflects not only the interest payments a bondholder will receive, but also the gain/loss he will make when it matures. The income element is the same 'current yield' calculation performed above. The gain/loss element is calculated by taking the difference between the current market price and the nominal value of the bond (e.g. in our example 100 - 95 = 5), dividing it by the number of years til maturity (assume 5 years for simplicity, so 5/5 = 1) and then dividing that figure by the current price of the bond (1/95 x 100 = 1.05%) The yield to redemption is the sum of the current yield (5.36%) and the capital yield (1.05%) = 6.41%. Further SuggestionsRedemption chargeRedemption Period Mandatory redemption schedule Redemption Redemption cushion gross redemption yield redemption redemption date redemption price Redemption Redemption penalty overhang Redemption date Redemption Redemption statement Right of redemption Overhanging redemption penalty Serial redemption Preferred equity redemption stock (PERC) Redemption penalties |
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