Which type of bond can be paid off early at a specified call price?

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Master the UCF ACG2021 Principles of Financial Accounting Final Exam. Study with comprehensive practice tests, flashcards, and multiple choice questions, each with detailed explanations. Ace your exam!

A callable bond is a type of bond that allows the issuer to redeem it before its maturity date at a predetermined call price. This feature benefits the issuer, as it provides flexibility to refinance the debt if interest rates decrease or if the issuer's financial circumstances change favorably. When a callable bond is issued, investors are typically compensated with a slightly higher yield to account for the risk that the bond may be called away from them before maturity.

In contrast, a serial bond is issued in a series with staggered maturity dates, whereas a term bond has a single maturity date at which the entire principal amount is due. An unsecured bond, on the other hand, is backed only by the issuer's creditworthiness and not by any specific collateral. Consequently, the other types of bonds do not possess the specific feature of being callable, which distinguishes the callable bond as the correct answer in this question.