Funding agreement

Funding agreement is a contract that guarantees repayments over a defined period of time. Funding agreement can take many forms, but usually repayments consist of principal and interest. A funding agreement requires a lump sum investment with a fixed rate (or variable rate based e.g. on LIBOR or TIBOR).

Funding agreements are low-risk investments that institutional investor may purchase. In such agreement lump sum is provided to the seller. As the funding agreement is associated with low risk, it is often purchased by mutual funds and pension plans.

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