1. What is Yield to Call (YTC)?

Yield to Call (YTC) is the return on a bond if it is called by the issuer before its maturity date. It considers the call price, coupon payments, and time until the call date to estimate the bond's yield.

2. How Does the Calculator Work?

The calculator uses the YTC formula:

Where:

• \( Coupon \) — Annual coupon payment (USD)
• \( Call\ Price \) — Price at which bond can be called (USD)
• \( Price \) — Current market price of the bond (USD)
• \( Years \) — Years until call date (years)

Explanation: The formula calculates the annualized return considering both the coupon payments and capital gain/loss if the bond is called.

3. Importance of YTC Calculation

Details: YTC helps investors compare callable bonds and assess potential returns if the issuer exercises their call option. It's particularly important when bonds are trading above call price.

4. Using the Calculator

Tips: Enter all values in USD except for years. All values must be positive numbers. The result is expressed as a percentage.

5. Frequently Asked Questions (FAQ)

Q1: How does YTC differ from YTM?
A: Yield to Maturity (YTM) assumes the bond is held until maturity, while YTC assumes it's called at the earliest call date.

Q2: When is YTC most relevant?
A: When bonds are trading above their call price and interest rates are falling (making calling likely).

Q3: What's a typical YTC range?
A: Varies by market conditions, but generally between 2-10% for investment grade bonds.

Q4: Does YTC account for reinvestment risk?
A: No, like most yield measures, it assumes coupons can be reinvested at the same rate.

Q5: How accurate is this calculation?
A: It provides a good estimate but actual returns may vary due to market conditions and exact call timing.