A callable bond can be redeemed by the issuer before it matures if that provision is included in the terms of the bond agreement, or deed of trust.
Bonds are typically called when interest rates fall, since issuers can save money by paying off existing debt and offering new bonds at lower rates. If a bond is called, the issuer may pay the bondholder a premium, or an amount above the par value of the bond.
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- Convertible bond, Indenture, Noncallable, Par Value, Prerefunding, redemption, Sinking fund
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