diff --git a/crates/core/component/stake/src/penalty.rs b/crates/core/component/stake/src/penalty.rs
index 8a66951e50..6896b71ed2 100644
--- a/crates/core/component/stake/src/penalty.rs
+++ b/crates/core/component/stake/src/penalty.rs
@@ -58,7 +58,7 @@ impl Penalty {
 
     /// Compound this `Penalty` with another `Penalty`.
     pub fn compound(&self, other: Penalty) -> Penalty {
-        Self((self.0 * other.0).expect("compounding penalities will not overflow"))
+        Self((self.0 * other.0).expect("compounding penalties will not overflow"))
     }
 
     /// Apply this `Penalty` to an `Amount` of unbonding tokens.
diff --git a/crates/core/component/stake/src/undelegate.rs b/crates/core/component/stake/src/undelegate.rs
index 34e0102fbc..f7ccb2bb8e 100644
--- a/crates/core/component/stake/src/undelegate.rs
+++ b/crates/core/component/stake/src/undelegate.rs
@@ -36,7 +36,10 @@ impl EffectingData for Undelegate {
 impl Undelegate {
     /// Return the balance after consuming delegation tokens, and producing unbonding tokens.
     pub fn balance(&self) -> Balance {
-        let stake = Balance::from(Value {
+        // We produce undelegation tokens at a rate of 1:1 with their
+        // unbonded value. When these tokens are claimed, we carry over
+        // penalties accumulated during the unbonding window.
+        let undelegation = Balance::from(Value {
             amount: self.unbonded_amount,
             asset_id: self.unbonding_token().id(),
         });
@@ -46,8 +49,8 @@ impl Undelegate {
             asset_id: self.delegation_token().id(),
         });
 
-        // We consume the delegation tokens and produce the staking tokens.
-        stake - delegation
+        // We consume the delegation tokens and produce the undelegation tokens.
+        undelegation - delegation
     }
 
     pub fn unbonding_token(&self) -> UnbondingToken {