**A Yield to Call Calculator is a financial tool used to find the potential return an investor can expect if a callable bond is redeemed or “called” by the issuer on a specific date in the future. **

This converter helps investors evaluate the **yield** they would receive if they hold the bond until its **call date**, considering the bond’s current price, call price, coupon rate, and the time remaining until the call date.

The **Yield to Call Calculator** is an essential tool for investors dealing with **callable bonds**, as it provides valuable insights into the potential returns and helps make informed investment decisions.

## Yield to Call Calculator

Suppose an investor purchased a callable bond with the following details:

- Settlement Date: January 1, 2022
- Maturity Date: January 1, 2032
- Call Date: January 1, 2027
- Annual Coupon Rate: 5%
- Call Price: $105 (per $100 par value)
- Purchase Price: $102

To calculate the **Yield to Call** for this bond, we’ll use the formula:

```
YTC = (Annual Coupon Payments + (Call Price - Purchase Price) / Years to Call Date) / Purchase Price
```

Substituting the values:

- Annual Coupon Payments = $5 (5% of $100 par value)
- Call Price = $105
- Purchase Price = $102
- Years to Call Date = 5 (from January 1, 2022, to January 1, 2027)

```
YTC = ($5 + ($105 - $102) / 5) / $102
= ($5 + $3 / 5) / $102
= ($5 + $0.60) / $102
= $5.60 / $102
= 0.0549 or 5.49%
```

Therefore, the **Yield to Call** for this bond is **5.49%**.

**Example 2:**

Let’s consider another example with different values:

- Settlement Date: June 1, 2021
- Maturity Date: June 1, 2031
- Call Date: June 1, 2026
- Annual Coupon Rate: 6%
- Call Price: $103 (per $100 par value)
- Purchase Price: $98

Calculating the **Yield to Call**:

```
YTC = (Annual Coupon Payments + (Call Price - Purchase Price) / Years to Call Date) / Purchase Price
```

Substituting the values:

- Annual Coupon Payments = $6 (6% of $100 par value)
- Call Price = $103
- Purchase Price = $98
- Years to Call Date = 5 (from June 1, 2021, to June 1, 2026)

```
YTC = ($6 + ($103 - $98) / 5) / $98
= ($6 + $5 / 5) / $98
= ($6 + $1) / $98
= $7 / $98
= 0.0714 or 7.14%
```

Therefore, the **Yield to Call** for this bond is **7.14%**.

## How to Calculate Yield to Call on Financial Calculator?

To calculate the **Yield to Call** on a financial calculator, follow these steps:

- Input the
**settlement date**(the date the bond was purchased). - Enter the
**maturity date**(the original maturity date of the bond). - Input the
**call date**(the date the bond can be called or redeemed by the issuer). - Enter the
**annual coupon rate**(the interest rate the bond pays annually). - Input the
**call price**(the price at which the bond will be redeemed on the call date). - Enter the
**purchase price**(the price at which the bond was bought). - Select the appropriate calculation mode (e.g., “Yield to Call” or “YLD/C”).
- The calculator will display the
**Yield to Call percentage**.

## What is Yield to Call?

The **Yield to Call (YTC)** is a measure of the total return an investor can expect to receive if a **callable bond** is redeemed by the issuer on a specific **call date**. It considers the bond’s current market price, call price, coupon rate, and the time remaining until the call date.

```
Yield to Call = (Annual Interest Payments + (Call Price - Purchase Price) / Years to Call Date) / Purchase Price
```

The **Yield to Call** is important for investors because it helps them evaluate whether holding a callable bond until its call date is a profitable investment decision or if they should consider selling the bond before the call date.

## Yield to Call Calculation Formula

The formula to calculate the **Yield to Call** is:

```
YTC = (Annual Coupon Payments + (Call Price - Purchase Price) / Years to Call Date) / Purchase Price
```

Where:

**YTC**= Yield to Call**Annual Coupon Payments**= Annual interest payments received from the bond**Call Price**= The price at which the bond will be redeemed on the call date**Purchase Price**= The price at which the bond was bought**Years to Call Date**= The number of years remaining until the call date

## Benefits of Using Yield to Call Calculator?

Using a **Yield to Call Calculator** offers several benefits to investors:

**Accurate Calculations**: The calculator performs complex mathematical calculations accurately, reducing the risk of manual errors.**Time-Saving**: Rather than performing tedious calculations manually, the calculator provides instant results, saving time and effort.**Decision-Making**: By evaluating the**Yield to Call**, investors can make informed decisions about whether to hold or sell a callable bond before the call date.**Comparison**: Investors can compare the**Yield to Call**of different bonds to identify the most profitable investment opportunities.**Scenario Analysis**: The calculator allows investors to analyze various scenarios by adjusting input values, such as call dates or purchase prices, to evaluate potential outcomes.

## What is yield to call for dummies?

The **yield to call** is a way to calculate how much money you’ll make on a **bond** if the bond issuer decides to **call** (or buy back) the bond early. It’s like figuring out how much you’ll earn if you invest in a savings bond, but the bank decides to pay you back sooner than the full term.

Here’s how it works:

- You buy a bond for a certain price (let’s call it the
**purchase price**). - The bond pays you a fixed amount of interest each year (called the
**coupon rate**). - The bond has a
**call date**, which is a specific date in the future when the issuer can choose to buy the bond back from you at a predetermined price (the**call price**).

The **yield to call** tells you what your total return would be if you hold the bond until the **call date** and the issuer buys it back from you at the **call price**. It considers the interest payments you’ll receive, the call price, and the time remaining until the call date.

## How do you calculate the YTM?

The **Yield to Maturity (YTM)** is the total return you’d get if you hold a bond until it **matures** (reaches its end date). It’s like the yield to call, but instead of assuming the bond gets called early, it assumes you hold it until the very end.

To calculate the **YTM**, you need to know:

- The
**purchase price**of the bond - The
**par value**(face value) of the bond - The
**coupon rate**(annual interest payments) - The
**time to maturity**(years left until the bond matures)

There’s a specific formula for **YTM**, but it’s quite complex. Most investors use a financial calculator or Excel to find the **YTM** easily.

## How do you calculate yield to call in Excel?

In Excel, you can use the `=YIELD`

function to calculate the **yield to call**. Here’s the syntax:

```
=YIELD(settlement, maturity, rate, pr, redemption, frequency, [basis])
```

`settlement`

is the date you purchased the bond`maturity`

is the bond’s original**maturity date**`rate`

is the annual**coupon rate**`pr`

is the**purchase price**of the bond`redemption`

is the**call price**of the bond`frequency`

is how often the bond pays interest (1 for annual, 2 for semi-annual, etc.)`basis`

is an optional argument for the day-count convention (0 or omitted for 30/360)

For example, if you bought a bond on 1/1/2022 that matures on 1/1/2032 with a 5% coupon rate, paid semi-annually, for a price of $98, and the **call price** on 1/1/2027 is $102, the formula would be:

```
=YIELD("1/1/2022", "1/1/2032", 0.05, 98, 102, 2)
```

This will give you the **yield to call** as a decimal value (e.g., 0.0549 for 5.49%).

Using Excel’s built-in functions makes it easy to calculate the **yield to call** (or other bond yields) without having to use complex formulas manually.