Yield to Call (YTC) - Definition

Many bonds, especially those issued by corporations, are callable. This means that the issuer of the bond can redeem the bond prior to Maturity by paying the call price, which is greater than the Face Value of the bond, to the bondholder. Often, callable bonds cannot be called until 5 or 10 years after they were issued. When this is the case, the bonds are said to be call protected. The date when the bonds can be called is referred to as the Call date.

The Yield to call is the Rate of Return that an investor would earn if he bought a Callable bond at its current market price and held it until the call date given that the bond was called on the call date. It represents the Discount Rate which equates the discounted value of a bond's future cash flows to its current market price given that the bond is called on the call date. The formula for calculating a yield to call is very straightforward. Essentially, it involves dividing the total annual income of the callable bond by the current Principal Amount and market price.



Terms near "Yield to Call (YTC)"

Yield to Maturity (YTM)
Yield to Worst (YTW)
Yupcap
Z-Bond
Z-Certificate
Z-Score
Z-Share
Z-Test
Z-Tranche
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