callable bond

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Callable Bond

A bond that may be redeemed before maturity. Callability allows the bond to be called at the discretion of the issuer within certain limits. When the bond is called, the bondholder receives the par value (or sometimes a bit more) and does not receive any more coupons. Callable bonds are issued to allow the issuers to hedge against interest rate risk. That is, if interest rates fall significantly, the issuer can call the bond and issue a new bond at a lower interest rate, reducing its liabilities. However, to protect the bondholder, most callable bonds also include call protection which prevents the bonds from being called for a certain period of time and thereby guarantees the current interest rate for that time.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

callable bond

A bond that is subject to redemption by its issuer before maturity.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Callable bond.

A callable bond can be redeemed by the issuer before it matures if that provision is included in the terms of the bond agreement, or deed of trust.

Bonds are typically called when interest rates fall, since issuers can save money by paying off existing debt and offering new bonds at lower rates. If a bond is called, the issuer may pay the bondholder a premium, or an amount above the par value of the bond.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
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The bank said the unsecured, redeemable bonds carry a coupon rate of 8.42 percent.
As part of the new arrangements, the Welsh Government will be able to issue redeemable bonds on the international bond market to institutional investors, governments, traders and individuals.
As with irredeemable bonds, the price of redeemable bonds can fluctuate over time.
1 Calculating the internal rates of return for Kite's redeemable bond Time [pounds Discount Present Discount Present sterling] factors at value at factors at value at a discount 8% a discount 10% rate of 8% rate of 10% Year 0 (100) 1.000 (100.00) 1.000 (100.00) Years 1-5 1 3.993 3.99 3.791 3.79 Year 5 150 0.681 102.15 0.621 93.15 6.14 (3.06)
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