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Call Convertible


A convertible with a call feature giving the issuer the right to redeem the convertible before maturity at a preset price (known as the call price). This price is usually at par or a small premium (1-5%) to par. Investors receive, in addition to the call price, the amount of interest that has accrued between the previous coupon date and the call date. A bond will be called once its value without the call feature equals the call price. If the company calls the convertible when its value is lower than the call price, then it will be overpaying bondholders.


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