If a bond has a call feature, it often has a call penalty, which must be paid to the bondholder in partial compensation for the early retirement of the bond.

Question

Quizplus · Accepted Answer

A call feature allows the issuer to redeem the bond before its maturity date, and a call penalty compensates the bondholder for the early redemption, which might deprive them of expected interest payments.

If a Bond Has a Call Feature, It Often Has