Entering a Callable Bonds Deal
A callable bond, also known as a redeemable bond, is a bond in which the issuer has the right to redeem prior to its maturity date, under certain conditions. When issued, the bond will explain when it can be redeemed and what the price will be. In most cases, the price will be slightly above the par value for the bond and will increase the earlier the bond is called. If interest rates drop enough, the investor may wind up with their principal returned and be faced with less attractive bond offerings.
On May 25, 2006, you purchase a $30,000 10-year callable bond paying 6.5% interest, which is a higher interest rate than similar noncallable bonds. The bond is callable after five years at a price of 103 (that is, 103% of the face value, or $30,900). The option instrument (line 1 of 2) is used to define the early bond buy-back schedule.
| Page | Field | Field Value |
|---|---|---|
|
Deal Detail |
|
|
|
|
Unit |
US001 |
|
|
Deal ID |
TCALL |
|
|
Instrument Type |
CALLBOND |
|
|
Transaction Date |
05/31/2006 |
|
|
Line |
1 of 2 |
|
|
Instrument Base Type |
Option |
|
Option Details (section) |
||
|
|
Start Date |
05/31/2006 |
|
|
Term |
3653 |
|
|
Expiry Date |
05/31/2016 |
|
|
Purchase/Write |
Purchase |
|
|
Option Status |
Active |
|
|
Option Delta |
1.00000000 |
|
|
Initial Intrinsic Value |
0.0 |
|
|
Currency |
USD |
|
|
Premium Payments/Receipts (group box) |
|
|
|
Payment Date |
06/02/2006 |
|
|
Payment Amount |
0.00 |
|
|
Payment Currency |
USD |
|
|
Option Exercise Dates (group box) |
|
|
Start Date |
05/31/2006 |
|
|
End Date |
05/31/2016 |
|
|
Strike Rate |
103.00000 |
|
|
Deal Detail |
|
|
|
|
Line |
2 of 2 |
|
|
Instrument Base Type |
Interest Rate Physical |
|
|
Contingent Upon Base Line |
1 |
|
|
Settlement Date |
05/31/2006 |
|
|
Term |
3653 |
|
|
Maturity Date |
05/31/2016 |
|
|
Issue Date |
05/31/2006 |
|
|
Coupon Date |
05/31/2006 |
|
Classification |
Investment |
|
|
|
Rate Type |
Fixed |
|
Rate |
6.5000000 |
|
|
Day Count Basis |
Actual/Actual |
|
|
Interest Calculation |
Interest Bearing |
|
|
Par Amount |
30,000.00 |
|
|
Currency |
USD |
|
|
Settlement Amount |
30,900.00 |
|
|
Price % of Par |
103.00000000 |
|
|
Discount Premium |
Constant Yield Method |
|
|
Amort Method |
Non Amortization |
|
|
Interest Dates and Calculations (section) |
||
|
Interest Frequency |
Quarterly |
|
|
Interest Calculation (group box) |
||
|
Same Interest Each Period |
(selected) |
|
|
First Coupon |
Normal First Coupon Period |
|
|
Last Coupon |
Normal Last Coupon Period |
|
|
Interest Date Rule (section) |
||
|
Forwards from Issue Date |
(selected) |
|
|
Payment Date |
Business Days - Paid in Arrears |
|
|
Accounting Treatment |
Held to Maturity |
|
|
Deal Status |
Open |