What is a ‘Call Price’
A call price is the price at which a bond or a preferred stock can be redeemed by the issuer. This price is set at the time the security is issued. Also referred to as “redemption price”.
Explaining ‘Call Price’
For example, let’s say the TSJ Sports Conglomerate issues 100,000 preferred shares with a face value of $100 with a call provision built in at $110. This means that if TSJ were to exercise its right to call the stock, the call price would be $110.
A company may exercise its right to call preferred stock if it wishes to discontinue payment of the dividend associated with the shares. It may choose to do this in an effort to increase earnings for common shareholders.
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- An examination of corporate call policies on convertible securities – www.jstor.org [PDF]
- Call option pricing when the exercise price is uncertain, and the valuation of index bonds – www.jstor.org [PDF]
- Anticipated information releases reflected in call option prices – www.sciencedirect.com [PDF]
- Put-call parity and market efficiency – www.jstor.org [PDF]
- Indexing a bond's call price: an analysis of make-whole call provisions – www.sciencedirect.com [PDF]
- Why firms issue convertible bonds: the matching of financial and real investment options – www.sciencedirect.com [PDF]
- Tests of the Black-Scholes and Cox call option valuation models – www.jstor.org [PDF]
- An empirical examination of the Black-Scholes call option pricing model – www.jstor.org [PDF]