Business and Personal Finance Dictionary

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• BOND INSURANCE
  
  A financial guaranty insurance policy provided by a well-capitalized, rated (claims paying ability) insurance company which pledges to make timely payments of principal and interest on a bond or bond issue in the event that the issuer is unable to pay. Insurance premiums on new issues are paid at closing from bond proceeds (as a cost of issuance) and are usually calculated as a percentage of debt service on the insured bond or bonds. For arbitrage yield purposes, a bond insurance premium may be treated as interest expense.
  
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