Targeted Accrual Redemption Note - TARN

AAA

DEFINITION of 'Targeted Accrual Redemption Note - TARN'

An investment vehicle, calculated based on a variation of the LIBOR formula, which provides a guaranteed sum of coupons. Once the coupons you've recieved reaches the target cap, the note will be redeemed and you will be paid the par value of the note. Targeted Accrual Redemption Notes (TARN) typically have coupon payments that are based on an inverse floating LIBOR calculation. Thus, they may have good performance in the short-term if interest rates decrease, but may also underperform if interest rates rise.

INVESTOPEDIA EXPLAINS 'Targeted Accrual Redemption Note - TARN'

One of the more distinguishing features of a TARN is the possibility of an early termination. It is based on a predetermined accumulation of the coupons. Once that sum is reached, the investor receives the final payment of par and the contract ends.

RELATED TERMS
  1. LIBOR

    LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate ...
  2. Short Term

    1. In general, holding an asset for short period of time. 2. ...
  3. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  4. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  5. Note

    A financial security that generally has a longer term than a ...
  6. Redemption

    The return of an investor's principal in a fixed income security, ...
Related Articles
  1. The Advantages Of Bonds
    Investing

    The Advantages Of Bonds

  2. Understanding The Time Value Of Money
    Investing Basics

    Understanding The Time Value Of Money

  3. Promissory Notes: Not Your Average IOU
    Personal Finance

    Promissory Notes: Not Your Average IOU

  4. Principal-Protected Notes: Hedge Funds ...
    Options & Futures

    Principal-Protected Notes: Hedge Funds ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center