Callable bonds can be redeemed prior to maturity by the firm.

Question

Quizplus · Accepted Answer

Callable bonds do contain a provision which allows the issuer to redeem the bonds prior to their scheduled maturity. This is typically done in order to reduce interest costs if prevailing interest rates have fallen, or to eliminate a particularly expensive debt obligation. However, there are usually restrictions on callable bonds that protect investors, such as a minimum period before the bond can be called, and a call premium that compensates the bondholder for the early redemption.

Callable Bonds Can Be Redeemed Prior to Maturity by the Firm