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 detriment of the bondholder) if market interest rates have risen since the bond was issued.

Question

Quizplus · Accepted Answer

A call feature is more likely to be exercised if market interest rates have fallen since the bond was issued, allowing the issuer to refinance at a lower cost.

A Call Feature in a Bond Allows the Issuer the Opportunity