Definition of Call premium:
Call premium is the dollar amount over the par value of a callable debt security that is given to holders when the security is redeemed early by the issuer. The call premium is also called the redemption premium. In options terminology, the call premium is the amount that the purchaser of a call option must pay to the writer.
Amount above the par value of a bond that its issuer must pay to the holders if the bond is redeemed before its maturity date. Call premium usually declines with the years of the bonds issue date; it is higher for bonds called after 5 years than for those called after 10 years. It compensates the bond holder for disruption in interest earnings, and for the effort to reinvest funds.
The call premium is an amount over the face value of the security and is paid in the event that the security is redeemed before the scheduled maturity date. Put another way, the call premium is the difference between the call price of the bond and its stated par value.
How to use Call premium in a sentence?
- For options, call premium is the amount paid when buying a call option.
- Call premium is the amount above par value a debt security owner receives if the security is called early.
- Bonds, preferred shares, and other callable securities are generally called when interest rates fall.
Meaning of Call premium & Call premium Definition