Redemption (finance)

In finance, redemption refers to the process of someone repaying or withdrawing their investment or debt, such as returning borrowed money or cashing out a security. For example, when an investor redeems a mutual fund, they sell their shares back to the fund and receive cash. Similarly, a borrower redeems a bond by repaying the principal amount at maturity. Redemption ensures that the invested or borrowed funds are returned to the appropriate party, often involving specific procedures and timing dictated by the terms of the financial agreement.