Call Risk Definition
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A type of investment risk when a bond may be called, or redeemed prior to maturity, and that the investor will not be able to reinvest the principle for the same or a higher rate of return. This risk increases when interest rates are falling and it becomes more attractive for the bond issuer to call their bonds with the higher interest rates and issue new bonds with a lower interest rate. Most bonds that do have a call provision have some protection for a specified number of years.
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