Variable Rate Demand Note - VRDN


DEFINITION of 'Variable Rate Demand Note - VRDN'

A debt instrument that represents borrowed funds that are payable on demand and accrue interest based on a prevailing money market rate, such as the prime rate. The interest rate applicable to the borrowed funds is specified from the outset of the debt, and is typically equal to the specified money market rate plus an extra margin.

BREAKING DOWN 'Variable Rate Demand Note - VRDN'

Because money market interest rates, such as the bank prime rate, are variable over time, the interest rate applicable to this type of demand note is variable as well. Every time the prevailing money market rate changes, a variable rate demand note's interest rate is adjusted accordingly.

As the name implies, these debt instruments are payable on demand. This means that the lender of the funds can request repayment of the entire debt amount at its discretion, and the funds must be repaid once the demand has been made.

  1. Floating-Rate Note - FRN

    A note with a variable interest rate. The interest rate is usually ...
  2. Variable Rate Demand Bond

    A bond with floating coupon payments that are adjusted at specific ...
  3. Indexed Rate

    An interest rate charged on loans to borrowers that is calculated ...
  4. Variable Coupon Renewable Note ...

    A renewable fixed income security with variable coupon rates ...
  5. Variable Interest Rate

    An interest rate on a loan or security that fluctuates over time, ...
  6. Note

    A financial security that generally has a longer term than a ...
Related Articles
  1. Investing Basics

    How Interest Rates Affect The Stock Market

    Whether you're buying lunch, a home or a stock, you're influenced by interest rates.
  2. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  3. Options & Futures

    Callable Bonds: Leading A Double Life

    Find out more about these dangerous and exciting cousins to regular bonds.
  4. Bonds & Fixed Income

    Retail Notes: A Simpler Alternative To Bond Funds

    These securities are meant to be held until maturity, removing the burden of complex pricing that sometimes plagues bonds.
  5. Investing

    Where the Price is Right for Dividends

    There are two broad schools of thought for equity income investing: The first pays the highest dividend yields and the second focuses on healthy yields.
  6. Financial Advisors

    Ditching High-Yield Bonds for Plain Vanilla Ones

    In a low-rate environment, it's tempting to go for higher yield bonds. However, you might be better off sticking with the plain vanilla ones.
  7. Bonds & Fixed Income

    What is an Indenture?

    An indenture is a legal and binding contract between a bond issuer and the bondholders.
  8. Bonds & Fixed Income

    Credit Default Swaps: An Introduction

    This derivative can help manage portfolio risk, but it isn't a simple vehicle.
  9. Investing

    Understanding High Yield Fund Performance

    For exchange traded fund, not all high-yield ETFs are the same. So, we take a look at one high yield investment in particular to set the stage for you.
  10. Investing

    Is US Inflation Too Low?

    One reason the Fed has delayed its first rate hike: U.S. inflation has been persistently running below the stated 2 % level the central bank seeks to target.
  1. What are the maximum Social Security disability benefits?

    The average Social Security disability benefit amount for a recipient of Social Security Disability Insurance (SSDI) in 2 ... Read Full Answer >>
  2. How do I calculate the future value of an annuity?

    When planning for retirement, it is important to have a good idea of how much income you can rely on each year. There are ... Read Full Answer >>
  3. Have hedge funds eroded market opportunities?

    Hedge funds have not eroded market opportunities for longer-term investors. Many investors incorrectly assume they cannot ... Read Full Answer >>
  4. Are high yield bonds a good investment?

    Bonds are rated according to their risk of default by independent credit rating agencies such as Moody's, Standard & ... Read Full Answer >>
  5. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  6. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center