call premium

Call Premium

1. The dollar amount over the par value of a callable fixed-income debt security that is given to holders when the security is called by the issuer.

2. The amount the purchaser of a call option must pay to the writer.

Notes:

1. The call premium is somewhat of a penalty paid by the issuer to the bondholders for the early redemption.

2. In order to receive the rights associated with a call option, the premium must be paid to the seller.

See also: Callable Bond, Conversion, Extraordinary Redemption, Forced Conversion, Indenture, Make Whole Call, Refinance, Yield to Call

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Call premium

Premium in price above the par value of a bond or share of preferred stock that must be paid to holders to redeem the bond or share of preferred stock before its scheduled maturity date.

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call premium

The difference between the principal amount of a security and the price at which the security can be called by the issuer. During the first few years a call is permitted, the premium is generally equal to one year's interest. Thereafter, the premium gradually declines to zero at maturity. Calls for sinking fund requirements are usually made at par rather than at a premium. Also called redemption premium.