Difference between Yield to Maturity and Yield to Call are:
Yield to Maturity:
- Definition: YTM means the interest rate for which the present value of the bonds payments equals the price.
- Length of maturity: As an investor, you should be aware that this yield is valid only if the bond is continued up to maturity.
- Factors considered: The calculation of yield to maturity is based on the coupon rate, the length of time to maturity and the market price of the bond.
- Concept applicability: This concept is applicable to the non-callable bond.
Yield to Call:
- Definition: YTC tells the total return that would receive.
- Length of maturity: As an investor, you should be aware that this yield is valid only if the bond is called prior to maturity.
- Factors considered: The calculation of yield to call is based on the coupon rate, the length of time to the call date and the market price of the bond.
- Concept applicability: This concept is only applicable if a bond is called the bond.
