Series 53: Yield To Call

Taken from our Series 53 Online Guide

Yield to Call

Bonds are often issued as callable bonds to protect the issuer against interest rate risk. A callable bond, remember, is one that may be redeemed prior to its maturity date.

Bonds are often called when interest rates have declined and the issuer can issue a new set of bonds at a lower interest rate. If a bond has a call date, yield to maturity loses much of its meaning, particularly when the bond is selling at a premium (which occurs when interest rates have fallen).

Recall that yield to call is the yield assuming that you hold the security only

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