call premium investment & finance definition
premium that bond issuers must pay to purchasers of their callable bonds to
compensate them for the fact that the bonds may be called before maturity and
the bondholders may not receive as much interest over the life of the bond as
anticipated. The call premium is the amount above the value at maturity that
the issuer must pay to the bondholder for possibly calling the bond.
See call premium in Wall Street Words
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.
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