Explain the term - yield to call, Financial Management

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Illustrate the process of calculating call/ put options yields

Issuing corporation will use provision if interest rates fall substantially below coupon rates offered on the security and investor will use put option if he can get better returns elsewhere.

For bonds with call/ put options yields are calculated to the nearest year at which call/put option is exercisable. This yield is called yield to call (YTC) which is different from yield to maturity (YTM).

 


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