Yield to Call

The yield to call is a measure of the return on an investment in a bond that may be redeemed by the issuer before maturity. The yield to call is calculated by taking the current yield and adding the difference between the call price and the current market price, divided by the number of years remaining until the call date.

The yield to call is important for investors who are considering buying a callable bond. The yield to call tells investors the potential return on their investment if the bond is called before maturity.

The yield to call is calculated using the following formula:

```
YTM = (C + P*(1+YTM)^n) / (P*(1+YTM)^n - C)
```

Where:

* YTM is the yield to call
* C is the call price
* P is the current market price
* n is the number of years remaining until the call date

For example, consider a bond with a face value of $1,000, a current market price of $950, a call price of $1,025, and a maturity date of 5 years. The yield to call would be calculated as follows:

```
YTM = (1025 + 950*(1+YTM)^5) / (950*(1+YTM)^5 - 1025)
```

```
YTM = 5.2%
```

This means that the investor would earn a yield of 5.2% if the bond is called before maturity.

The yield to call is a useful tool for investors who are considering buying a callable bond. However, it is important to note that the yield to call is only an estimate of the return on the investment. The actual return may be higher or lower, depending on the market conditions at the time of the call.