Callable bond

Also referred as redeemable bond, is a bond that can be called back or redeemed by the issuer company at any time before the maturity of that bond. In other words the issuer has right to get the bond back by paying the price of bond called call price, however, buying back the bond the is not the obligation of the issuer

Call price of bond

Bond call price is price of bond at which the issuer can buy back the bond before reaching the maturity date. In other words call price is the predetermined price at which the bondholder has to sell the bond before the maturity of the bond. Issuer of bond has right to buy back the bond but not the responsibility.

The call price will usually more than par price of a bond (called call premium) in case of height yield securities

Formula for bond call price

Price of callable bond = straight bond price – call option price