What is Callable Bond Price ?
A callable bond price refers to the market value of a bond that includes an embedded call option, giving the issuer the right to redeem or "call back" the bond before its scheduled maturity date. This feature allows issuers to take advantage of favorable market conditions, such as declining interest rates, by refinancing the bond at a lower rate or retiring it altogether. However, the presence of a call option introduces uncertainty for investors, as it means their investment may be terminated earlier than expected, potentially leading to reinvestment risk. Callable bonds typically trade at a slight discount to non-callable bonds of similar quality to compensate investors for this risk. The callable bond price fluctuates based on prevailing interest rates, the remaining term to maturity, and the terms of the call option, making it important for investors to assess callable bond risk and factor it into their investment decisions.
How to Calculate Callable Bond Price?
Callable Bond Price calculator uses Callable Bond Price = Non Callable Bond Price-Call Option Price to calculate the Callable Bond Price, The Callable Bond Price refers to the market value of a bond that can be redeemed by the issuer before maturity, impacting its overall value and yield. Callable Bond Price is denoted by CBP symbol.
How to calculate Callable Bond Price using this online calculator? To use this online calculator for Callable Bond Price, enter Non Callable Bond Price (NCBP) & Call Option Price (COP) and hit the calculate button. Here is how the Callable Bond Price calculation can be explained with given input values -> 62 = 65-3.