PERPETUAL BOND Meaning and
Definition
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A perpetual bond refers to a type of bond that has no fixed maturity date. It is a bond with an indefinite life span, meaning that it pays interest indefinitely unless the issuer defaults or decides to redeem it. Also known as a perpetuity or an irredeemable bond, perpetual bonds offer the issuer a long-term source of capital without the obligation to repay the principal amount at a specified future date.
Unlike conventional bonds, perpetual bonds do not have a specified maturity date or a predetermined term. They pay periodic interest to bondholders, usually in the form of fixed coupon payments, based on a predetermined yield or interest rate. The interest payments are made at regular intervals, such as annually or semi-annually, providing a steady stream of income for bondholders.
Perpetual bonds are particularly attractive to issuers as they represent a form of capital that can be considered as equity-like financing. They do not create a liability on the issuer's balance sheet, allowing companies to potentially raise additional funds without increasing their debt levels. Furthermore, perpetual bonds can provide stability to the issuer's capital structure and help reduce refinancing risks that may arise with bonds of fixed maturity.
Investors who hold perpetual bonds are exposed to both interest rate risk and credit risk. If interest rates rise, the coupon payments on perpetual bonds may become less attractive relative to other investments. Additionally, the creditworthiness of the issuer plays a significant role in determining the risk associated with the bond, as a default by the issuer would lead to a loss of interest payments.
Common Misspellings for PERPETUAL BOND
- oerpetual bond
- lerpetual bond
- -erpetual bond
- 0erpetual bond
- pwrpetual bond
- psrpetual bond
- pdrpetual bond
- prrpetual bond
- p4rpetual bond
- p3rpetual bond
- peepetual bond
- pedpetual bond
- pefpetual bond
- petpetual bond
- pe5petual bond
- pe4petual bond
- peroetual bond
- perletual bond
- per-etual bond
- per0etual bond
Etymology of PERPETUAL BOND
The term "perpetual bond" originated from the combination of two words: "perpetual" and "bond".
The word "perpetual" comes from the Latin word "perpetuus", meaning "continuous" or "everlasting". In English, "perpetual" refers to something that lasts indefinitely or never comes to an end.
The word "bond" has its roots in Old English and Old Norse, where it initially referred to a physical link or a means of tying or fastening. Over time, "bond" evolved to represent a financial instrument that creates a contractual obligation between the issuer and the bondholder.
Therefore, when "perpetual" and "bond" are combined, a "perpetual bond" refers to a type of financial instrument that has no fixed maturity or repayment date. It is a long-term debt security with no expectation of principal repayment, potentially paying interest indefinitely.
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