To sell a callable bond, the issuer must pay a higher interest rate than on an otherwise equivalent noncallable bond.

Name: To sell a callable bond, the issuer must pay a higher interest rate than on an otherwise equivalent noncallable bond.
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This is because the call option gives the issuer the right to redeem the bond before maturity, which is a potential risk for the investor. To compensate for this risk, a higher interest rate is offered on callable bonds.

To Sell a Callable Bond, the Issuer Must Pay a Higher