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Will a call provision increase or decrease the yield to maturity at which a firm can issue a bond?
Callable bonds will pay a higher yield than comparable non-callable bonds. Take from answers.com
What happens when a yield to maturity is less than the yield to call?
The issuer will call the bonds and issue new bonds to the maturity date.
Yield to maturity vs yield to call?
Yield to maturity assumes that the bond is held up to the maturity date. This is a disadvantage. If the bond is a yield to call , it can be called prior to the maturity date. Thus, the ivestor should sell the callable bond prior to maturity if he expects that he will earn higer return by doing so (in other words when yeild to call is higher than held to maturity).
What provision allows the issuer to redeem the bond before its maturity at a specified price?
Call Provision
What is the difference between yield to maturity and yield to call?
Yield to maturity means the interest rate for which the present value of the bond's payments equals the price. It's considered as the bond's internal rate of return. Yield to. call is a measure of the yield of a bond, to be held until its call date.
What are the different types of yields on bonds?
* yield to worst (to maturity or to call date) * current yield * coupon yield
What is likely to happen to yield to maturity on bonds in the marketplace if inflationary expectations increase?
The prices of bonds will fall and yields to maturity (or call date) will rise, since investors will require greater yields on their investments to offset the expected increase in inflation.
What is the risk of a municipal bond?
---- Depending on the number of days to call (or maturity), coupon rate, and price paid, any bond will have a different yield to worst (the lower of the yield to maturity or yield to call). If you decide to hold the bond to the potential call date or maturity date, the only risk assumed will be the risk of the issuer's default or coupon reset. This risk is qualified by rating agencies, such as Standard & Poor's, with bond ratings like AAA or BB, etc. AAA municipal bonds are commonly insured against the issuer's default. If you want to sell a municipal bond before the maturity or call date, you additionally bear the market risk of price fluctuations. These fluctuations will be mainly due to expectations about future interest rate changes in the market (e.g., Fed Fund Rate by FOMC).
What is a call provision when referring to money market instruments?
A call provision is a provision that gives the issuers of bonds (or other fixed income instrument) the right but not responsibility to repurchase the bonds or redeem a security prior to it maturing. A call provision will almost always favor the issuer rather than the investor.
What is the value of a call option on maturity?
The value of a call option on maturity is equal to its intrinsic value.For instance, a call option with a strike price of $10 on maturity and its underlying stock being at $15 will have a value of $5, which is its intrinsic value.
What is YTC?
Yield To Call or Yakima Training Center.
What is a call date?
A call date is a date on which a callable bond may be redeemed before its maturity.
