Business and Personal Finance Dictionary

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• CAPITAL APPRECIATION BOND (CAB)
  
  A bond which pays no interest on a periodic basis, but accretes in value from the date of issuance (delivery date) to the date of maturity. CABs usually accrete to a future denomination of $5,000 and are sold at a deep discount to $5,000. However, the discounted purchase price is considered the Par Amount of the CAB maturity. CABs are sold with a stated accretion rate and accretion table which demonstrates how the interest that would be paid on a current-interest bond is instead compounded on a periodic basis, reinvesting the interest at the same rate for the life of the bond. At maturity, the investor receives the original par amount plus all the accreted interest, which together is usually a multiple of $5,000.
  
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