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Chapter ® - Retirement of Bonds at Maturity, Before Maturity and by Converting to Shares - Exercising a Bond Call Option, Book Market Value & Call Back Price

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What is Callable Bond? definition and meaning

Compare All Subscription Services. What Is a Callable Bond? For example, a bond that matures in might become callable in Issuers must clearly specify whether their bonds are callable, and the precise terms of the call option, when the bonds are first offered for sale. Typically, a bond that is callable will become callable at a premium.

Callable Bond - ucujaluxu.web.fc2.com

After a year, the call price might decline to After another year, it might decline to , or par, and remain callable at par for the remainder of its life. Issuers call bonds when interest rates drop below where they were when the bond was issued.

Obviously, callability benefits issuers and hurts investors, who are faced with the prospect of reinvesting their money at lower interest rates. Issuers entice investors to buy callable bonds by paying higher interest rates on callable bonds than on noncallable bonds.

But the price of a callable bond will not rise much above its call price, no matter how low interest rates go, because dropping interest rates increase the likelihood that it will be called. Most municipal bonds and some corporate bonds are callable.

Treasury bonds and notes, with very few exceptions, are noncallable. Here's Why Valeant's Stock Is Heading Straight to Zero Biotech Stock Mailbag: Why Intrexon CEO R. Kirk Should Not Be Trusted 15 Dumbest College Majors if You Want to Make Money When You Graduate Ex-CEO John Sculley Weighs In on Apple-Tesla Merger Talk Does Amazon Really Have Antitrust Issues, Per Trump's Latest Rant?

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