What is a Bond Call Price?

A bond call price is the contractually-mandated price at which a bond holder must sell a bond back to the issuer. This call price is stated in the bond indenture, which may also state the date range within which a bond can be called. Outside of this date range, the issuer cannot buy back its bonds. The bond issuer usually triggers the call option when interest rates decline; this presents an opportunity for the issuer to replace the bonds with ones that have a lower interest rate.

Example of a Bond Call Price

ABC International issues a bond that contains a requirement for the issuer to pay 108% of the par value of a bond if it calls the bond. It originally sold the bonds at a face amount of $1,000, so exercising the call price feature would require it to pay $1,080 to each bond holder in exchange for the outstanding bond.