SIE practice questionmediumYield to call
A bond is purchased at a premium and is called at the first call date. Compared to the yield to maturity, the yield to call will be:
- ADependent on the coupon payment frequency
- BHigher
- CThe same
- DLower✓ Correct answer
Explanation
Why D — Lower
When a premium bond is called before maturity, the remaining premium is lost faster, lowering the yield to call versus yield to maturity. Payment frequency does not affect this relationship.
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