Final answer:
The correct option is c.A call option gives a bond issuer the right to redeem or repurchase a bond before its maturity date. This option is part of the bond's terms at issuance and allows issuers to take advantage of falling interest rates by reissuing bonds at lower rates.
Step-by-step explanation:
The right of a bond issuer to redeem or repurchase a bond issue before its maturity date is provided by a call option.
Bonds are debt securities under which the issuer owes the holders a debt and is typically obligated to pay them interest (the coupon) and repay the debt at a later date known as the maturity date.
A call option is a provision that is included as part of the bond's terms at the time of issuance.
This option gives the issuer the flexibility to repurchase the bond at predetermined times and prices before the bond matures. It is often utilized when interest rates fall, allowing the issuer to retire.
The existing high-interest debt and reissue new bonds at a lower interest rate, thereby reducing their borrowing costs.