Bond

[CFAHouston]

Question of the day:

For a callable bond, yield to call is a more conservative measure of yield whenever:

A - bond price is priced at or above its call price
B - bond is trading for more than par but less than call price
C - bond is trading at less than par
D - non of the above

 

[testami]

A

If the bond is trading above par, but the company can call it for less....your yield would be lower.

 

[jamespucyk]

A) a bond trading above the call price would indicate that interest rates have dropped to a point where the issuer would gain greatly by issuing new debt. When this scenario presents itself there is a high likelihood that the bond will be called.

 

[CFAHouston]

Correct.