capital appreciation bond

capital appreciation bond ( CAB)
Securities that are issued at par, but which do not remit interest to the holder until maturity. The interest accrues at the coupon rate and is compounded at a stated rate. The issuer holds the accumulated, compounded interest until the maturity date of the bonds. At the maturity date, the bondholder receives all of the accumulated interest along with the par amount of the security. Reflecting their structure, CABs are sometimes called compound interest bonds or accumulators. American Banker Glossary

Financial and business terms. 2012.

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