Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called:
A) options.
B) early retirement bonds.
C) callable bonds.
D) debentures.

Question

Quizplus · Accepted Answer

Bonds that can be redeemed by the issuer prior to their maturity at a specified dollar amount are known as callable bonds. This provision allows the issuer to lower its interest expenses if interest rates decline or if the creditworthiness of the issuer improves, making it easier to issue new debt at a lower rate. Early retirement bonds are not a commonly used term and options and debentures do not accurately describe this type of bond.

Bonds That Are Subject to Retirement at a Stated Dollar