Dictionary of Finance and Investment Terms: PERLS
PERLS
acronym for principal exchange-rate-linked securities. Debt instrument that is denominated in U.S. dollars and pays interest in U.S. dollars, but with principal repayment linked to the performance of the U.S. dollar versus a foreign currency. For example, a PERLS offering by the student loan marketing association (Sallie Mae), underwritten by Morgan Stanley Dean Witter, links the principal repayment to the exchange rate of the Australian dollar versus the U.S. dollar. If the Australian dollar gains value against the U.S. dollar when the bond matures, redemption will be at a premium to par value. If the Australian dollar is weaker, redemption will be at a discount.
