Question

1-what are the deffrences between callable bonds and puttable bond ?

2- how they are useful for bond issuers and bondholders

Answer 1

CALLABLE BOND:

Issuer has right to call back the bonds at a pre agreed price and a pre fixed date.since these bonds allow a benefit to repay off the liability before maturity, these bonds usually offer a coupon rate higher than normal bonds.

PUTTABLE BOND:

Bondholder has the right to return back the bonds at a pre fixed date before maturity.These bonds offer a coupon rate lower than normal bond.

callable bonds is useful for bond issuers in a way that it can redeem the bond before maturity if market interest rate goes down.It is useful to bondholder in a way that bondholder gets more interest than normal bonds.

puttable bonds is useful for bond issuer in a way that it will pay the interest rates lesser than the normal bonds.It is useful to bondholder in a way that bondholder can return back the bond to the bond issuer before maturity if interest rates increased in the market.