Glossary of Municipal Securities Terms

VARIABLE RATE DEMAND OBLIGATION (VRDO)

Floating rate obligations that have a nominal long-term maturity but have a coupon rate that is reset periodically (e.g., typically daily or weekly) by the remarketing agent. The investor has the option to put the bond back to the tender agent at any time with specified notice (e.g., seven days). The put price is par plus accrued interest. These securities typically are supported by a liquidity facility, (i.e., letter of credit, standby bond purchase credit or self-liquidity), which assists in making these securities money market fund eligible. See: LIQUIDITY FACILITY; REMARKETING AGENT; TENDER AGENT. Compare: AUCTION RATE SECURITIES.

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