Called bond - Definition

A Callable bond is one that allows the issuer of the bond to retain the privilege of redeeming the bond at some point before the bond reaches the date of Maturity. When an issuer calls its bonds, it pays investors the call price (usually the Face Value of the bonds) together with Interest-791'>Accrued interest to date and, at that point, stops making interest payments. There are three primary types of call features namely; Optional Redemption (allows the issuer, at its Option, to redeem the bonds), Sinking Fund Redemption (requires the issuer to regularly set aside money for the redemption of the bonds before maturity) and Extraordinary Redemption (allows the issuer to call its bonds before maturity if certain specified events occur).



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