1. What is Preferred Yield to Call?

The Yield to Call (YTC) is the yield of a preferred stock if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity.

2. How Does the Calculator Work?

The calculator uses the Preferred Yield to Call formula:

Where:

• \( Dividend \) — Annual dividend payment (USD)
• \( Price \) — Current price of the preferred stock (USD)
• \( Call \) — Call price of the preferred stock (USD)
• \( Years \) — Years until call date (years)

Explanation: The first part of the equation calculates the dividend yield, while the second part calculates the capital gains yield if called.

3. Importance of YTC Calculation

Details: YTC helps investors compare different preferred stock investments and assess the potential return if the issuer exercises their call option.

4. Using the Calculator

Tips: Enter all values in USD except for years. Price and call values should be positive numbers. Years must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between YTC and YTM?
A: YTC assumes the security will be called, while Yield to Maturity (YTM) assumes it will be held until maturity.

Q2: What are typical YTC values?
A: YTC varies widely but is typically between 4-8% for investment-grade preferred stocks.

Q3: When do companies typically call preferred shares?
A: Companies usually call when interest rates have fallen, allowing them to refinance at lower rates.

Q4: Are there limitations to this calculation?
A: This assumes the call will definitely occur and doesn't account for reinvestment risk or changing market conditions.

Q5: How does YTC affect investment decisions?
A: Investors should compare YTC to other available investments and consider the likelihood of the call being exercised.