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SIE: Debt Securities
SIE practice questionhardYield to Call

A 20-year bond is callable after 10 years. If interest rates fall and the bond is called at year 10, which yield will the investor most likely realize?

  1. ACurrent yield
  2. BYield to call✓ Correct answer
  3. CYield to maturity
  4. DCoupon rate
Explanation

Why BYield to call

If a bond is called, the investor earns the yield to call (YTC) as the bond is repaid early. Yield to maturity assumes holding until maturity; current yield and coupon rate ignore call features.

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