Callable Bonds
With callable bonds, the issuer has the option to redeem or call specific bonds prior to the stated maturity date. Callable bonds come in several forms.
Callable bonds come with higher yields than non-callable bonds to compensate investors for the increased risk and to mitigate possible losses. Some callable bonds have a call premium, which is a call price that is set at a higher value than the face value of the bond. A $1,000 bond with a call price of $1,100 has a $100 call premium payable to the investor if the bond is called. Call provisions sometimes require an issuer to pay a premium for early redemption. Such provisions generally prov