Define: Call Price

A call price refers to the predetermined price at which a bond or other financial instrument can be redeemed or called back by the issuer before its maturity date.

Issuers may choose to call back a bond if interest rates have decreased since the bond was issued, allowing them to refinance at a lower rate. Additionally, if the issuer’s financial situation has improved, they may choose to call back the bond to reduce their debt burden.

No, the call price and call date are typically specified in the bond’s terms and conditions. The issuer can only call back the bond on or after the specified call date and at the predetermined call price.

Yes, the call price can be set at a premium or discount to the bond’s face value. This is often determined by market conditions and the issuer’s financial position.

No, bondholders are legally obligated to sell their bonds to the issuer if the call option is exercised. However, they will receive the call price as specified in the bond’s terms.

In most cases, an issuer cannot call back a bond if it is in default. Default typically triggers certain rights for bondholders, such as acceleration of repayment or enforcement of security interests.

The call price is typically predetermined and specified in the bond’s terms, so it is not subject to negotiation between the issuer and bondholders.

Yes, when a bond is called, bondholders may have to recognise any accrued interest as taxable income. It is advisable to consult with a tax professional to understand the specific tax implications in each situation.

Yes, the call option is typically binding on subsequent owners of the bond. If the bond is called, the current owner is obligated to sell it back to the issuer at the specified call price.