Yield to Call Calculator

What is Yield to Call (YTC)?

Yield to Call (YTC) is a financial metric used by fixed-income investors to estimate the annualized rate of return on a callable bond if the issuer exercises their right to redeem (call) the bond before its scheduled maturity date.

Yield to Call Formula

The exact Yield to Call ($r$) is the internal rate of return (IRR) that satisfies the present value equation:

$$P = \sum_{t=1}^{N} \frac{C / f}{\left(1 + \frac{r}{f}\right)^t} + \frac{P_{\text{call}}}{\left(1 + \frac{r}{f}\right)^N}$$

Where:

• $P$: Current market price of the bond
• $C$: Annual coupon payment ($V_{\text{face}} \times \text{coupon rate}$)
• $f$: Payment frequency per year (e.g., 2 for semi-annual)
• $N$: Total coupon periods until call date ($t_{\text{call}} \times f$)
• $P_{\text{call}}$: Call price specified in the bond covenant

Approximate YTC Formula

For quick estimations, investors often use the approximate Yield to Call formula:

$$\text{YTC}_{\text{approx}} \approx \frac{C + \frac{P_{\text{call}} - P}{t_{\text{call}}}}{\frac{P_{\text{call}} + P}{2}}$$