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Simple English definitions for legal terms
noncallable bond
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A quick definition of noncallable bond:
A noncallable bond is a type of investment where the borrower cannot pay back the loan before the agreed-upon date. This means that the investor is guaranteed to receive their interest payments until the bond matures. A bond is a type of security, which is a type of investment that represents ownership or a creditor relationship with a company or government. Securities have no intrinsic value and their worth depends on the financial condition of the entity that issued them.
A more thorough explanation:
A noncallable bond is a type of security that cannot be redeemed by the issuer before its maturity date. This means that the bondholder is guaranteed to receive interest payments for the entire life of the bond.
For example, if a company issues a noncallable bond with a maturity date of 10 years and an interest rate of 5%, the bondholder will receive 5% interest payments every year for 10 years. The company cannot redeem the bond before the 10-year period is up.
This type of bond is attractive to investors who want a steady stream of income without the risk of the bond being called back by the issuer. It also provides a level of certainty for the bondholder, as they know exactly how much they will earn from the bond over its lifetime.