A call feature in a bond allows the issuer the opportunity to repurchase bonds at a stated price prior to maturity. This option has a greater chance of being exercised (to the benefit of the bondholder) if market interest rates have fallen since the bond was issued.

Question

Quizplus · Accepted Answer

A call feature benefits the issuer, not the bondholder. If market interest rates fall, the issuer can repurchase the bonds at the lower call price and reissue new bonds at a lower interest rate, which is not beneficial to the bondholder.

A Call Feature in a Bond Allows the Issuer the Opportunity