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Redemption |
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RedemptionThe process of canceling a defeasable title to land, such as is created by a mortgage foreclosure or tax sale.RedemptionThis is the right of the mortgagor to recover mortgaged property on repayment of the loan and any interest due. This legally means that once you as the borrower have finished repaying the mortgage you took out, the property is yours and the lender has no further claim on it. If you pay of the mortgage ahead of schedule you may face a redemption penalty which compensates the lender for loss of interest.RedemptionThe re-purchase of a security, such as a bond or preferred stock, by the issuing company at or before maturity.RedemptionRepayment of a debt security or preferred stock issue, at or before maturity, at par or at a premium price.Redemption Similar MatchesRedemption chargeRedemption chargeThe commission a mutual fund charges an investor who is redeeming shares. For example, a 2% redemption charge (also called a back end load) on the sale of shares valued at $1000 will result in payment of $980 (or 98% of the value) to the investor. This charge may decline or be eliminated as shares are held for longer time periods. Redemption priceRedemption priceSee: Call price 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%. Overhanging redemption penaltyOverhanging redemption penaltyAn early redemption charge that lasts beyond the benefit period is referred to as an extended or overhanging redemption penalty. These should be avoided where possible. Redemption penalty overhangRedemption penalty overhangThis 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. Further SuggestionsRedemption dateExtended redemption penalty redemption price gross redemption yield Preferred equity redemption stock (PERC) Redemption penalties redemption fees Redemption statement Mandatory redemption schedule Redemption fee redemption date right of redemption Right of redemption Redemption Period Serial redemption Redemption cushion |
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