Question

Yield−to−call is

A.

calculated using the time to call and the par value of the bond.

B.always less than the

yield−to−maturity.

C.commonly used for bonds with

deferred−call provisions.

D.

based solely on the call premium and ignores interest payments.

Answer 1

B.always less than the yield to maturity.

the call provision usually llimits the bonds price appreciation, so the yield to call is less than yield to maturity.

Yield to call does not ignore interest payments.

It is used for various kinds of bonds and not only the bonds with deferred call provisions.