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Zero-Coupon Accrual Note

An accrual note (accumulation note) in which the initial price is below par, while it has a zero-coupon or very low rate. To compensate investors, the note comes with an interest accrual mechanism embodied in an embedded range accumulation option. A note holder receives a total redemption payment that is capped at par with automatic maturity and principal redemption. The note return depends on an investor’s ability to forecast the range of underlying interest rate.


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