Targeted Accrual Redemption Note - TARN

What is a 'Targeted Accrual Redemption Note - TARN'

A targeted accrual redemption note (TARN) is 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.

BREAKING DOWN '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. Range Accrual

    A form of interest accrual in which the coupon rate is only earned ...
  2. Coupon Rate

    The yield paid by a fixed income security. A fixed income security's ...
  3. Super Floater

    A floating-rate collateralized mortgage obligation (CMO) tranche ...
  4. Current Coupon Bond

    A bond with a coupon rate that is within 0.5\% of the current ...
  5. Par Value

    The face value of a bond. Par value for a share refers to the ...
  6. At Par

    A term that refers to a bond, preferred stock or other debt obligation ...
Related Articles
  1. Professionals

    Basic Coupon Structures

    CFA Level 1 - Basic Coupon Structures. Learn the various coupon structures of bonds. Provides an example of a floating rate bond and discusses how it relates to caps and floors.
  2. Budgeting

    Coupon Shopping: Clip Your Way To Savings

    Use coupons strategically to score big savings on everyday purchases.
  3. Bonds & Fixed Income

    Advanced Bond Concepts: Bond Pricing

    It is important for prospective bond buyers to know how to determine the price of a bond because it will indicate the yield received should the bond be purchased. In this section, we will run ...
  4. Entrepreneurship

    The Pros & Cons Of Using Coupons For Your Business

    Coupons can drive business to your store – you just need to make sure it's profitable business. Here are strategies that work.
  5. Investing Basics

    What is a "Coupon"?

    In the financial world, “coupon” represents the interest rate on a bond.
  6. Professionals

    Government Bonds

    CFA Level 1 - Government Bonds. Learn the various types of U.S. Government issued treasury securities. Also covers on and off-the-run securities and how to strip a bond.
  7. Investing Basics

    Explaining the Coupon Rate

    Coupon rate is the stated interest rate on a fixed income security.
  8. Professionals

    Yield

    FINRA Series 7 Online Study Guide Section 4 Debt Securities
  9. Bonds & Fixed Income

    Comparing Yield To Maturity And The Coupon Rate

    Investors base investing decisions and strategies on yield to maturity more so than coupon rates.
  10. Savings

    Crack The Code

    Frugal online shoppers are scoring free shipping, BOGO deals and 10 to 50% discounts simply by visiting the right coupon sites. Don’t click that “Purchase Now” button until ...
RELATED FAQS
  1. How can I calculate a bond's coupon rate in Excel?

    Find out how to use Microsoft Excel to calculate the coupon rate of a bond using its par value and the amount and frequency ... Read Answer >>
  2. What is the most common solvency ratios used in fundamental analysis?

    Learn about the difference between a bond's coupon rate and its yield rate, how the coupon rate influences market price and ... Read Answer >>
  3. How do debit spreads impact the trading of options?

    Find out what it means when a bond has a coupon rate of zero and how a bond's coupon rate and par value affect its selling ... Read Answer >>
  4. What types of fees apply to checking accounts?

    Learn about the difference between a bond's coupon rate and its yield to maturity, and how the par value, coupon rate and ... Read Answer >>
  5. How does a bond's coupon rate affect its price?

    Find out how a bond's coupon rate influences its price, including the role of government-dictated interest rates and the ... Read Answer >>
  6. How do interest rates affect a bond's coupon rate?

    Find out how the changes in the national interest rate affect the coupon rates of newly issued bonds and why coupon rates ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center