Bonds with Call Provisions

B

The correct answer is B. Callable bonds.

Callable bonds are bonds that give the issuer the right to repay the debt prior to the bond's maturity. The issuer can choose to call, or redeem, the bonds after a specified call date, usually at a premium to the bond's face value.

This feature is advantageous to the issuer because it allows them to take advantage of lower interest rates and reduce their borrowing costs. However, it can be disadvantageous to the bondholder because they may lose the opportunity to earn interest on their investment if the bond is called before maturity.

Municipal bonds, on the other hand, are issued by state and local governments to finance public projects and infrastructure. While they may have a call provision, this is not a defining characteristic of municipal bonds.

Convertible bonds allow the bondholder to convert their bond into a specified number of shares of the issuer's common stock. Zero coupon bonds are bonds that do not pay periodic interest but are instead sold at a discount to their face value and then redeemed at face value at maturity. Neither of these types of bonds have a call provision.