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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Call Provision

Definition:

See call protection. It's just the details and fine print that tell you whether the issuer can call a bond early (and how they can do that). 

Example

Let's say Nike wants to buy a bunch of factories in India and it doesn't have the cash for it. Current interest rates are high, and Nike thinks that it will have a lot of cash coming in over the next few years as its shoes will get much cheaper to make after this acquisition. Nike goes ahead and issues the bonds at a high rate—8%—but there's a call provision. The fine print says that Nike can buy the bonds back at 102.5 cents on the dollar at any time after the first two years have passed. Nike is happy because they get a chance at smaller interest payments and less debt. Investors get at least some money from their investment.