Bunny Bond
A type of bond that offers investors the option to reinvest coupon payments into additional bonds with the same coupon and maturity.
Also known as a "multiplier bond" or a "guaranteed coupon reinvestment bond". Investopedia Says:
Bunny bonds are an effective way to protect against reinvestment risk, which arises from the possibility that interest rates will drop in the future. With a normal bond, investors are exposed to the risk of having to reinvest their coupons at a lower interest rate. If an investor chooses to reinvest all cash coupons back into the bond he or she is currently holding, it behaves similarly to a zero-coupon bond because the investor receives no cash flows until maturity. Related Terms:
Bond
Coupon
Coupon Bond
Debenture
Indenture
Maturity
Reinvestment Risk
Zero-Coupon Bond |