Explanation:
The yield to worst is the lowest among the sequence of yields to call and the yield to maturity. For this bond:
Since the yield to second call (2.6%) is the lowest, it represents the yield to worst. This aligns with the CFA concept of identifying the most conservative yield measure for callable bonds.
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An analyst evaluates a callable bond with the following characteristics: current price of 105 per 100 of par value, 4 years to maturity, a 4% annual coupon rate, and call prices of 103 at year 2 and 101 at year 3. The bond's yield to worst is most likely:
A
The yield to maturity.
B
The yield to first call.
C
The yield to second call.
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