Formula to calculate Yield to Call (YTC) Yield to maturity is a formula used to determine what interest a bond pays until it reaches maturity. Assume a bond is maturing in 10 years and its yield to maturity is 3.75%. Calculating Yield to Call Example. Yield to call is the price that will be paid if the issuer of a callable bond opts to pay it off early. The formula below shows the relationship between the bond's price in the secondary market (excluding accrued interest) and its yield to maturity, or other yields, depending on the maturity date chosen. Callable bonds generally offer a slightly higher yield to maturity. A callable bond can be valued by discounting its coupon payments and call price using the following formula: When its yield to call is calculated, the yield is 3.65%. Finally, add the two types of yield -- interest rate and bond price -- for each of the possible call dates as well as the maturity dates. Yield to call refers to earnings from callable bonds, where the issuing company or agency can call the bond, essentially paying it back early with less interest, usually saving itself money. Yield to call can be mathematically derived and calculated from the formula. When it comes to helping you estimate your return on a callable bond, yield to maturity has a flaw. It is highest at the start of call period and approaches the yield to maturity as the bond nears its maturity date. The Formula Relating a Bond's Price to its Yield to Maturity, Yield to Call, or Yield to Put. There are two deviations from the standard formula: Divide by the number of years to convert to an annual rate. If the bond is called, the par value will be repaid and interest payments will come to an end, thus reducing its overall yield to the investor. The formula and steps to calculate yield to call are exactly the same as how we calculate yield to maturity, i.e., you calculate the discount rate that makes the present value of the future bond payments (coupons and par) equal to the market price of the bond plus any accrued interest. The bond has a call provision that allows the issuer to call the bond away in five years. Yield to Call is a finance function or method used in the context of stock market, often abbreviated as YTC, represents the return from callable bond before its maturity, whereas, the YTM - Yield to Maturity represents the rate of return percentage, if the bond is held until its maturity in the stock market.. Yield on a callable bond is called yield to call which varies with time. It is a date after the security is traded to the buyer that is after the issue date. 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