Investments & Financial Planning

What are the advantages of non-callable tax free bonds ?

A non-callable feature protects the owner against the bond being prepaid when interest rates fall. When a bond is callable because of fallen interest rates, the issuer can "call" the bond, paying off the balance of the bond before maturity. If you own the bond, you would then need to reinvest the funds into another investment and thus earn less interest income. If you want to lock in the interest rate and be protected against your bond being called, you should opt for non-callable bonds even though the interest rate is slightly lower.

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