The formulas
- Price = sum of C / (1 + y/m)^k for k to the call date + call price / (1 + y/m)^n_call
- Yield to worst = lower of yield to call and yield to maturity
How it works
A callable bond lets the issuer repay early, usually at a small premium to face. Issuers call when rates fall, which is when a holder least wants the cash back. Yield to call measures the return if that happens at the first call date.
For a bond priced above the call price, yield to call is usually below yield to maturity, and the yield to worst is the one to quote. For a deep discount bond a call is unlikely and yield to maturity governs. Bonds with several call dates need a yield for each date. This tool covers the first.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What is yield to worst?
The lowest yield across the call dates and maturity, assuming the issuer acts in its own interest.
Why does a premium bond have a lower yield to call?
The premium paid above the call price is lost over fewer years.
Are make-whole calls covered?
No. A make-whole call pays a price set by a discount spread, and is rarely used to refinance cheaply.
Formulas on this page are the standard definitions.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.