Yield to call (YTC) is a financial term that describes the return a bondholder will receive if the bond is kept until the call date, which happens before the bond’s maturity date. The compound interest rate at which the present value of a bond’s future coupon payments and call price equals the current market price of the bond may be determined analytically.
Callable bonds are debt securities that allow bond investors to redeem the bonds—or the bond issuer to repurchase them—on the call date, at a price known as the call price. The call date of a bond happens before the maturity date by definition.
Bonds are generally callable after a period of time. They’re usually called for a modest premium above face value, however, the actual call price is determined by market rates.