Callable bonds can be redeemed prior to maturity by the firm. Such bonds will be called and redeemed if, for example, a decline in interest rates makes it attractive for the firm to issue lower coupon debt to replace high-coupon debt. A firm with cash from successful marketing efforts or a recent stock issue also may decide to retire its callable debt. Callable bonds usually are called away after a decline in interest rates. As rates fall, the bond’s price will not rise above its call price. Thus, for callable bonds, the inverse relationship between bond prices and interest rates breaks down once the bond’s market price reaches the call price. Many indentures state that, if called, callable bonds must be redeemed at their call prices, typically par value plus a call premium of one year’s interest. Investors in callable bonds are said to be subject to call risk. Despite receiving the call price, investors usually are not pleased when their bonds are called away. As bonds typically are called after a substantial decline in interest rates, the call eliminates their high coupon payments; they can reinvest the funds only in bonds that offer lower yields. In order to attract investors, callable bonds must offer higher coupons or yields than noncallable bonds of similar credit quality and maturity. Many indentures specify call deferment periods immediately after the bond issue, during which the bonds cannot be called.