The most appropriate measure for calculating yield is the yield of call.
This investor pays $125,000 for a 10% bond with a face value of $100,000. Therefore, the investor pays a premium of he 25% for the bond. If the bond is called before maturity (very likely because the current market interest rate must be lower than the coupon rate, otherwise the bond will not trade at a premium and The issuer can refinance itself by calling the bond issuance at a lower current market yield), losing the premium sooner than if the bond had been held to maturity, lowering the effective yield.
To do. Therefore, the yield on this bond is lower than the yield to maturity. Additionally, this bond is likely to be called, so using the call date is a good time frame to calculate the yield on this bond. By the way that is a difficult question.
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