A call feature allows the bond issuer to redeem the bond prior to maturity. This gives the issuer the option to retire the bond early if market conditions change, such as interest rates decreasing, allowing the issuer to refinance the bond at a lower rate.

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A Call Feature

Question 13

Multiple Choice

A call feature

A) allows the bondholder to redeem the bond prior to maturity.
B) allows the bond issuer to redeem the bond prior to maturity.
C) allows the bondholder to increase the coupon rate on the bond at specific points in time over the bond's life.
D) forces the bond issuer to buy back the bond prior to maturity at the bondholder's discretion.

Correct Answer: