What is a Call Price?

A call price is the price at which the holder of a bond can be forced by the issuer to sell back the bond to the issuer. A call occurs prior to the maturity date of the bond, usually because the issuer can refinance the debt at a lower interest rate. The call price is typically the face value of the bond, plus an additional percentage. The amount of the call price and the dates during which it can be enacted are specified in the indenture agreement associated with the bond.

Disadvantages of a Call Price

The issuer of a bond containing a call price will have to accept a lower price for them, in order to compensate investors for the risk of losing income if the bonds are called at some point in the future. Thus, the issuer will need to weigh the benefit of having a call price feature against the increased effective interest rate that investors will demand in exchange.