Yield to call %

Yield to Call (YTC) is the annualized rate of return an investor can expect if a callable bond is purchased at its current market price and held until the call date, assuming all coupon payments are received as scheduled and reinvested at the same yield.

Since callable bonds may be redeemed by the issuer on multiple potential call dates, we calculate YTC for each call date and display the minimum YTC as the effective value for comparison. This reflects the most conservative return an investor could receive if the bond is called early.

The formula is:

Bond Price = Σ (CouponPayment ÷ (1 + Yield ÷ PaymentsPerYear) ^ Period) + (CallPrice ÷ (1 + Yield ÷ PaymentsPerYear) ^ CallPeriods)

Key Terms:

• BondPrice – current market price of the bond.
• CouponPayment – payment received each period (FaceValue × CouponRate ÷ PaymentsPerYear).
• Yield – yield to call (annualized rate of return).
• PaymentsPerYear – number of coupon payments per year (e.g., 1, 2, or 4).
• Period – the number of the current coupon period (1, 2, 3 …).
• CallPeriods – number of periods until the call date.
• CallPrice – price at which the issuer can redeem the bond (may differ from FaceValue).

For bonds with multiple possible call dates, YTC is calculated separately for each date. The system displays the lowest YTC (i.e., the earliest and least favorable yield for the investor), to ensure conservative and realistic assessment of return.