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Tagged: mutual fund, trading account
<strong style=”margin: 0px; padding: 0px; list-style: none; border: none; outline: none; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: normal; text-align: justify;”>Redemption Of Units
<span style=”font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: normal; text-align: justify;”> Buying back/cancellation of the units by a fund on an on-going basis or on maturity of a scheme.</span>
<span style=”font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: normal; text-align: justify;”> The investor is paid a consideration linked to the NAV of the scheme</span>
A redemption is the return of an investors principal in a fixed income security such as a preferred stock or bond.
in the books of company who issued the shares, we see whether these preference shares are fully paid or not. Only fully paid up shares can be redeemed. In redemption, we repay the amount of preference shareholders. Following are the main journal entries which are passed for redemption of preference shares.
A redemption occurs in a fixed income security at par or at a premium price, upon maturity or cancellation by the issue.
Redemption occur With mutual funds, at the choice of the invinvestor, however tatins by the issuer may exist, such as minimum holding periods.
Explanation
A redemption is the return of an investor’s principal in a fixed income security, such as a preferred stock or bond; or the sale of units in a mutual fund.
Statement form
fixed income securities and are issued with a par value. When that par value is paid back to the purchaser of the preferred share, this is considered a redemption.
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