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ACCRUAL BOND Definition & Legal Meaning

Definition & Citations:

(1) A TRANCHE of a COLLATERALIZED MORTGAGE OBLIGATION that pays no COUPON interest or PRINCIPAL until all other tranches have been redeemed; this protects investors holding other tranches from PREPAYMENTS. The accrual bond is similar to a zero coupon bond but carries an explicit coupon rate and may ultimately pay both principal and coupons prior to final maturity. (2) A ZERO COUPON BOND. (1) Also known as ZBOND.ACCRUAL NOTE See RANGE FLOATER NOTE.

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