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Loan and Mortgage Terms Glossary |
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Range Bonds:
Bonds that stop paying an investor when the bond's reference rate is higher or lower than a predetermined range on an established index. The bonds pay an above-market coupon rate as long as the reference rate falls within the range. For example, if libor is the index, a range bond might pay libor plus 75 basis points for each day libor is between 3.5 and 5 percent. When libor is less than 3.5 percent or more than 5 percent, the bond accrues no interest. A range bond is a type of structured note.
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