What is a callable bond, who “calls” a bond, and under what circumstan

What is a callable bond, who “calls” a bond, and under what circumstances?

What will be an ideal response?

ANSWER

Callable bonds have the added feature that at contractually specified times and prices the issuer can repurchase or “call” the bonds away from the owners. In effect, a callable bond is the combination of a regular bond will a call option for the issuer. The issuer calls a bond when interest rates drop and they can refinance the bonds at a lower rate.