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If i buy a one year callable bond at par, with yield to maturity = 3%, and if the bond gets called after a month, then do i still get approx 3%/4= 0.75% interest when the bond is called back?

Or can they call back the bond before the first coupon date and basically just give me back my principal without paying the interest?

  • Do you really mean "yield to maturity" and not "coupon interest rate"? – DJohnM Feb 20 '15 at 18:07
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It depends. You'll have to see the documentation (prospectus) for the details of your particular investment. Most likely, you are entitled to the accrued interest from the last coupon to the call date. Most callable issues limit themselves to calling the bond on the coupon date in order to avoid the accrued interest calculation. Since calling the bond is just paying off the debt early, you will not get any future interest after the call date.

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