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Understanding Callable Bonds: Definition, Examples, and How They Work

By Robin Hartill, CFP – Updated Nov 21, 2023 at 10:10AM

Key Points

  • Callable bonds allow issuers to pay back the bond before maturity, often due to falling interest rates.
  • Investors face call risk with callable bonds, which may result in losing expected interest income early.
  • Callable bonds typically offer higher yields to compensate for the additional risk of early redemption.
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