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Redemption cushion

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Definition of Redemption cushion

Redemption Cushion Image 1

Redemption cushion

The percentage by which the conversion value of a convertible security exceeds the
redemption price (strike price).



Related Terms:

Cushion bonds

High-coupon bonds that sell at only at a moderate premium because they are callable at a
price below that at which a comparable non-callable bond would sell. cushion bonds offer considerable
downside protection in a falling market.


Mandatory redemption schedule

Schedule according to which sinking fund payments must be made.


Optimal redemption provision

Provision of a bond indenture that governs the issuer's ability to call the
bonds for redemption prior to their scheduled maturity date.


Preferred equity redemption stock (PERC)

Preferred stock that converts automatically into equity at a
stated date. A limit is placed on the value of the shares the investor receives.


Redemption charge

The commission charged by a mutual fund when 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 decrease or be eliminated as shares are held for
longer time periods.



Redemption value

See Par value.


Safety cushion

In a contingent immunization strategy, the difference between the initially available
immunization level and the safety-net return.


Redemption Cushion Image 1

Aging schedule

A table of accounts receivable broken down into age categories (such as 0-30 days, 30-60
days, and 60-90 days), which is used to see whether customer payments are keeping close to schedule.


aging schedule

Classification of accounts receivable by time outstanding.


Amortization Schedule

A schedule that shows precisely how a loan will be repaid. The schedule gives the required payment on each specific date and shows how much of it constitutes interest and how much constitutes repayments of principal.


Bonds payable

Amounts owed by the company that have been formalized by a legal document called a bond.


Brady bonds

bonds issued by emerging countries under a debt reduction plan.


Canada Savings Bonds

A bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value.


Collateral trust bonds

A bond in which the issuer (often a holding company) grants investors a lien on
stocks, notes, bonds, or other financial asset as security. Compare mortgage bond.


Convertible bonds

bonds that can be converted into common stock at the option of the holder.


Corporate bonds

Debt obligations issued by corporations.


Redemption Cushion Image 2

Dollar bonds

Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with
"U.S. Dollar" bonds, a common term of reference in the Eurobond market.


Eurodollar bonds

Eurobonds denominated in U.S.dollars.



Euroyen bonds

Eurobonds denominated in Japanese yen.


General obligation bonds

Municipal securities secured by the issuer's pledge of its full faith, credit, and
taxing power.


Global bonds

bonds that are designed so as to qualify for immediate trading in any domestic capital market
and in the Euromarket.


International bonds

A collective term that refers to global bonds, Eurobonds, and foreign bonds.


Investment grade bonds

A bond that is assigned a rating in the top four categories by commercial credit
rating companies. For example, S&P classifies investment grade bonds as BBB or higher, and Moodys'
classifies investment grade bonds as Ba or higher. Related: High-yield bond.


Loan amortization schedule

The schedule for repaying the interest and principal on a loan.


Long bonds

bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.


Long bonds

bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.


Scheduled cash flows

The mortgage principal and interest payments due to be paid under the terms of the
mortgage not including possible prepayments.


Serial bonds

Corporate bonds arranged so that specified principal amounts become due on specified dates.
Related: term bonds.



Short bonds

bonds with short current maturities.


Term bonds

Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is
payable at maturity. Related: serial bonds


Treasury bonds

Debt obligations of the U.S. Treasury that have maturities of 10 years or more.


Yankee bonds

Foreign bonds denominated in US$ issued in the United States by foreign banks and
corporations. These bonds are usually registered with the SEC. For example, bonds issued by originators with
roots in Japan are called Samurai bonds.



 

 

 

 

 

 

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