SIE practice questionmediumYield Calculations - YTC
If a callable bond is trading at a premium, which yield is the lowest?
- ACoupon rate
- BYield to maturity (YTM)
- CCurrent yield
- DYield to call (YTC)✓ Correct answer
Explanation
Why D — Yield to call (YTC)
When callable bonds are at a premium, early call shortens the period over which the premium is amortized, making YTC the lowest. YTM and current yield are higher, and the coupon is usually the highest.
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