When a bond trades above its call price, yield to call — not yield to maturity — is the more relevant return estimate, since the issuer can redeem it early.
How it works
The same approximate-yield formula this site’s bond yield calculator uses for yield to maturity is applied here against the call price and years to call instead of face value and years to maturity.
What this does not include
This is an approximation, not the exact yield a financial calculator’s iterative solver would produce — the same simplification this site’s bond yield calculator makes for yield to maturity, appropriate for comparison purposes but not for precise pricing.
How to use this calculator
- Enter the bond’s current price, call price, annual coupon, and years to the call date.
Frequently asked questions
When is YTC lower than YTM?
When the bond is trading above its call price — the price premium is recovered over a shorter period to the call date than to maturity, which lowers the annualized return.
Why would an issuer call a bond early?
Most often to refinance at a lower interest rate once market rates fall below the bond’s coupon — the same reason a homeowner refinances a mortgage.
Should I evaluate a callable bond by YTM or YTC?
Conservative practice is to compute both and use the lower (“yield to worst”) as the more realistic expected return, since the issuer will call the bond precisely when it’s advantageous for them, not the investor.
