Research : Yield Ahead

The new (September) issue of Canadian Moneysaver has been released, so now I am releasing the column that was in the old (July/August) one: Yield Ahead.

This article looks at yield calculation and provides a link to an accurate spreadsheet. As all of us know, you can’t use bond calculators to calculate preferred share yields due to the difference in treatment of accrued income on settlement … so, I hope, this article will help small investors be a little more accurate in their pricing.

¬†Look for the “Research” Link!

Update, 2007-6-10: I sometimes use a reference to this article when talking about Yield-to-Worst, but this calculation is not explicitly described in the article. To find the Yield-to-Worst of a preferred share:

  1. Calculate the Yield-to-Maturity for each call option available to the issuer.
  2. If necessary, adjust this list to reflect the potential for the holder to exercise retraction options to influence the scenario.
  3. The yield-to-worst is the lowest yield in the resultant list.

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