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What the terminology "REDEMPTION"
Redemption is paying off the principal to the bond holders, which usually happens at maturity. However, mortgage backed bonds MBB's often redeem a part of the principal with each coupon payment provided it is a pass through bond.
It means discharge of liability on account of debentures by repayment made to the debenture holders. The various methods of redemption of debentures are as under:
1.By drawing lots; 2.By payment in lump sum; 3.By converting existing debentures into new shares/debentures; 4.By purchase in the open market
Redemption literally means 'recovery' or 'reclamation'. In Accounting the term of redemption is used to convey that a particular bond or loan has been fully paid.
