Series 66: Callable Bonds

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 mitigate possible losses. Optional calls may also demand a call premium to lessen the risk of a call. When a call price is set at a higher value than the face value of the bond, the difference is the call premium. 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 e