Understanding Call Provisions in Bonds

Fixed income securities, such as bonds, have various features that affect their performance and risk profile. One important feature to consider is the call provision. A call provision allows the issuer to redeem the bond before its maturity date. This feature can impact the bond's yield and attractiveness to investors. If the issuer opts to call the bond, it typically happens when interest rates decline, allowing them to reissue debt at a lower rate. Understanding call provisions can help investors assess the risks and potential rewards of investing in callable bonds.

Which of the following statements correctly describes a characteristic of bonds with a call provision?