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Definition: Internote

Internotes are investment grade corporate debt securities, explicitly designed to facilitate the purchase by individual investors, and are issued by corporations such as Dow, GE Capital, Goldman Sachs and Bank of America. Internotes provide another avenue for investors pursuing higher yields, and are sold through a network of brokerage firms and dealers with new listings every week.

The main features of Internotes are that they provide individual investors a steady stream of income from investments in quality companies. Secondly, it makes a complicated product very simple, the internote is purchased at par and all the fees are included in the price, there is no accrued interest, discount or premium, one does not have to worry about calculating yield to maturity. Secondary markets also exists for internotes to improve their liquidity, though they are not as liquid as large corporate or government issues and they are not trading instruments. Callable and non-callable options are also available in these securities. Their maturity ranges from 1 to 25 years and are generally used for investment laddering and credit diversification. They usually have a starting price of $1000, known as par and are mostly priced in increments of $1000. They carry both credit and secondary market risk.

For example, If $1000 worth of bonds are bought, at maturity the principal is reimbursed with accumulated interest. They will be on offer for purchase during five days starting on Monday and have specific CUSIP numbers based on the stipualted terms. These terms usually include the maturity period, call provisions or coupons.


Hence, this concludes the definition of Internote along with its overview.

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