If a bond is callable, the issuer can call in the bond early—meaning you might not get the full amount of money you would have gotten if the bond went to its maturity date.
How much can you make with a callable bond? The answer will depend on when the bond is called. You can figure out a minimum yield by calculating the yield from the day you get the bond to the first possible date that it could be called.
Whether the bond will be called will depend on what interest rates do. If they drop, it's likely that the bond will be called early because the issuer won't want to pay the higher interest on the debt. If the rates stay the same or go up, just calculate yield to maturity. It's cheap borrowed money for the company at that point so they probably won't call the bond early.
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Finance: What is Term To Maturity?12 Views
finance a la shmoop what is term to maturity alright people well it's kind
of a lifecycle of a bond like a bond is issued or sold it has an assay a 15 year [Bond timeline appears]
duration somebody's written that money for 15 years its term to maturity when
it first was issued was 15 years but if you bought that bond nine years into it
some you know maturation process when all the hairs growing in funny places [Hairs grow out of bond]
then at that point it would have six years current maturity well what goes on
between these years interest payments and then eventually at the very end the
issuer pays back the principal to the investor who bought the bond and [Money transfers from issuer to investor]
everyone goes away happy-ish well bonds carry gradations in short medium and
long term terms to maturity like short term generally is considered one to five [Different types of bond appear]
years mid term medium term and something like that is like five to a dozen years
and long term is like up to you know thirty or even a hundred years after
that dozen or so no hard lines here they're all dotted and yeah Disney [Man discussing bonds at DisneyLand]
actually sold a hundred year bonds at one point and they are of course the
happiest bonds on earth [Disney bonds appear]
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What is Yield to Maturity? When calculating bond yields, the yield to maturity is the interest rate that an investor would ultimately accumulate if...