Also known as a call provision
An Optional Redemption allows the issuer to redeem or pay off its outstanding bonds ahead of schedule. In doing so, the issuer pays investors the par value of the bond, plus any interest that has been earned in the partial period before the next interest payment. Depending on the bond contract, the issuer may also pay an additional amount to bondholders known as a call premium.
Generally, optional redemptions cannot take place before a date specified in the bond contract such as 10 years after the bonds have been issued.
