Callable Bond

Accounting Dictionary

Callable Bond

A bond is callable when the borrower has the right to pay it back early.

Let’s say a company issues a 30 year bond to investors at 12%. Ten years pass and the interest rate has gone down to 6%. If the bond is callable, the company can borrow money from the bank at 6% and pay back the investors. The investors won’t like that. They WERE making 12% on their money and now if they go to reinvest it they can only get 6%. But the company loves it because they have cut their interest expense by half.

Sign Up to Learn More!

Join our mailing list today to get notified of new discount offers, course updates, Roger CPA Review news, and more!