When a bond is noncallable, the issuer cannot redeem it before the stated maturity date. Some bonds have call protection for their full term, and others for a fixed period - often ten years.
The appeal of a noncallable bond is that the issuer will pay interest at the stated coupon rate for the bond's full term. In contrast, if a bond is called, you receive a lump-sum repayment of principal, which you must reinvest.
Frequently, rates are lower at call that they were when the bond was issued, which means your reinvested principal will provide a smaller yield.
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- Callable bond, Convertible bond, Indenture, Par Value, Prerefunding, redemption, Sinking fund
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