Definition of Call price:
The call price (also known as "redemption price") is the price at which the issuer of a callable security has the right to buy back that security from an investor or creditor. Call prices are commonly found in callable bonds or callable preferred stock. The call price is set at the time the security is issued and is known by reading the issue's prospectus.
Callable securities are commonly found in the fixed-income markets and allow the issuer to protect itself from overpaying for debt by allowing it to buy back the issue at at a pre-determined price if interest rates or market prices change. This pre-determined price is the call price. For instance, if a company issues a bond paying a fixed coupon of 5% when interest rates are also 5%, they can use a call option to redeem that bond if interest rates drop to, say, 3% in order to be able to refinance their debt.
Money that the issuer must pay to the holder of a bond when it is redeemed. It is the sum of the par value and the call premium, and is specified in the bond indenture.
How to use Call price in a sentence?
- Issuers of bonds or preferred shares may use a call price to refinance lower interest rates if market conditions turn favorable.
- The call price is the pre-determined price at which the issuer of a callable security is able to redeem them from investors.
- Because callable securities generate additional risk for investors, bonds or shares with call prices will trade at a higher price than otherwise, known as the call premium.
Meaning of Call price & Call price Definition