Callable bond yields are typically higher than noncallable, "bullet maturity" bond yields because the investor must be compensated for taking the risk that the issuer will call the bond if interest rates fall, forcing the investor to reinvest the proceeds at lower yields.
Because callable bonds are riskier than bonds without a call feature, they have a higher yield.
With callable bonds, there is no loss of flexibility because the firm can call the bond at the call date.
and the firm has the option to call a bond.
A callable—redeemable—bond is typically called at a price slightly higher than the debt's par value. The higher the call value of a bond, the earlier in its life it is called. A bond maturing in 2030, for example, can be called in 2020. It could have a callable price of 102.
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