| Callable Bond |
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A bond that can be redeemed by the issuer prior to its maturity. Usually a premium is paid to the bond owner when the bond is called.
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If
interest rates have gone down since the company issued the bonds they
will likely refinance their bonds at a lower rate of interest. Because
the company can get a lower rate of interest they will call all the
bonds and reissue them at a lower rate of interest. The opposite is
true if rates rise. |
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