Yield to worst is the lowest of all the potential yield to calls and the yield to maturity. The name sounds ominous, but yield to worst is just another way of calculating the lowest potential return you might get from a bond. Some prudent investors consider yield to worst when deciding whether to purchase a callable bond. The most conservative measure of a bond’s yield is the yield to worst, or the lower of the yield to maturity or the yield to call. Financial and business terms. The New York Times Financial Glossary. Yield to worst is the lowest potential yield that a bond can generate without the issuer defaulting. After calculating yield to maturity and yield to call, you will be able to identify the yield to worst. $\begingroup$ In most cases yield to convention is the same as yield to worst, i.e. The yield to sinker on a sinking fund bond that anticipates some amount of the bond to be redeemed on the next scheduled sinking fund date. YTW is primarily a risk if the bond is purchased at a premium to par value. The yield to worst is the lowest yield you could possibly earn on the bond. The standard US convention for this series is to use semi-annual coupon payments, whereas the standard in the foreign markets is to use coupon payments with frequencies of … However, yield to maturity is only a relevant metric if the investor receives all coupon payments up to a bond’s maturity date. The yield to worst is the lowest potential yield that can be received on a bond without the issuer actually defaulting. Yield to worst describes the worst possible annual return an investor might get on a bond assuming it is held as long as possible and it does not default.Normally that would be the definition of yield to maturity but some bonds come with the potential to be called (repaid early) at the option of the borrower. An example Let's say you buy a bond with a par value of $1,000 and a coupon rate of 5%, and that you paid $1,030 for it. A. Right… in the worst case, what will the holder get in yield. The lowest potential yield that can be received on a bond without the issuer actually defaulting. Exhibit 2 illustrates the yield to worst for the S&P Intermediate Term National AMT-Free Municipal Bond Index, 2 a potential proxy for an intermediate municipal bond portfolio. Define Yield to Worst. Yield to worst. The YTM formula is used to calculate the bond’s yield in terms of its current market price and looks at the effective yield of a bond based on compounding. IQ Calculators' free financial calculators make some of the most complex calculations simple. Yield to worst (YTW): when a bond is callable, puttable, exchangeable, or has other features, the yield to worst is the lowest yield of yield to maturity, yield to call, yield to put, and others. Combining Yield to Maturity with Yield to Call and taking the minimum is known as the Yield to Worst. The lowest rate is the yield to worst for your bond. Yield to Worst. Consequences. The option-adjusted-yield is the yield-to-maturity after adding the theoretical value of the call option to the price. yield-to-worst contribution luxembourg-domiciled funds portfolio name yield-to-worst contribution base currency ab american income portfolio 3.72% usd ab asia income opportunities portfolio 3.96% usd ab asia pacific local currency debt portfolio 4.38% usd ab china bond portfolio 3.17% cny So the “yield to worst” calculation assumes that’s what happens, I guess. Determining the yield to current call is an important part of risk analysis in evaluating a callable bond. See Spanish-English translations with audio pronunciations, examples, and word-by-word explanations. 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