The yield to call is a more conservative yield measure whenever the price of a callable bond is quoted at a value
A) equal to or greater than par plus one year's interest.
B) equal to par.
C) equal to par less one year's interest.
D) less than par.
E) 5 percent over par.

Question

Quizplus · Accepted Answer

The yield to call is a measure of the yield that takes into account the earliest possible call date of a callable bond. It is a more conservative measure of yield because it assumes that the bond will be called on the earliest possible date, which would limit the investor's potential returns. If the price of a callable bond is quoted at a value equal to or greater than par plus one year's interest, it suggests that the bond is trading at a premium and the yield to call would be lower than the yield to maturity. Therefore, choice A is the correct answer.

The Yield to Call Is a More Conservative Yield Measure