This tool helps you calculate the yield to call on callable bonds quickly and easily.
About the Yield to Call Calculator
This Yield to Call (YTC) Calculator helps you determine the expected yield of a callable bond if it is held until the call date. This can be useful for investors to compare the earning potential of callable bonds against non-callable bonds.
How to Use:
- Enter the Face Value of the bond (e.g., 1000).
- Enter the Call Price, which is the price at which the bond can be redeemed before maturity.
- Enter the Annual Coupon Rate, which is the interest rate that the bond pays annually.
- Enter the Years to Call, which represents the number of years until the bond can be called.
- Click the “Calculate” button to get the Yield to Call.
How It Calculates:
The Yield to Call is calculated using the formula:
(Annual Coupon Payment + Call Premium) / Average Price
Where:
- Annual Coupon Payment is the yearly interest payment, derived from the face value and the annual coupon rate.
- Call Premium is the difference between the call price and the face value, divided by the years to call. This represents the additional value gained from the bond being called before maturity.
- Average Price is the average of the face value and the call price.
Limitations:
Note that the YTC calculator makes several simplifying assumptions:
- It assumes that coupon payments are made yearly.
- It does not consider taxes, fees, or other charges that might affect the actual yield.
- It assumes that the bond will be called at the earliest possible date, which might not happen in practice.
- The calculation is based on fixed inputs and does not account for changing market conditions.
Use this calculator as a guide but consult with a financial advisor for more detailed investment advice.