What does yield to worst mean?
Yield to worst (YTW) is the lowest modeled yield among specified bond repayment outcomes, commonly including maturity and eligible early redemption dates. Fidelity describes it as the lowest potential yield anticipated on a bond. A bond’s actual yield depends on its price, cash flows, terms, and whether an issuer exercises a redemption option. This page compares only the outcomes you enter; it does not establish the bond’s complete eligible-outcome set.
How does this calculator compare yields?
For each outcome, the calculator uses the entered purchase price, regular coupon payments, and redemption amount on the selected whole-year date. It solves for the periodic discount rate that makes the present value of those cash flows equal the purchase price. The result is expressed as a nominal annual rate by multiplying the periodic rate by the selected payment frequency. The maturity outcome uses face value as its redemption amount. Each enabled earlier outcome uses the redemption amount you enter.
The lowest computed rate is labeled the lowest modeled yield. For example, a bond could have one result for maturity and different results for multiple call prices and dates. Which one is lowest depends on the bond’s actual terms and the price and cash flows entered. This calculator does not use live market data.
Which redemption outcomes should I enter?
Read the prospectus, official statement, or offering documents and identify applicable dates and redemption amounts. Enter up to three whole-year outcomes before maturity. Leave a scenario unchecked if it does not apply. A whole-year interval is a simplification: actual bonds may have dates that do not align with regular coupon periods or dates measured from settlement. FINRA’s investor materials explain that yield to call accounts for an assumed early call and can differ from yield to maturity.
Some securities have sinking funds, mandatory redemptions, step-up coupons, make-whole provisions, extraordinary calls, or other features that need separate treatment. Fidelity notes that some YTW conventions exclude partial sinking-fund redemptions. This simple comparison does not assess whether an outcome is eligible under a particular broker or industry methodology, and it can miss outcomes you did not enter. Do not treat its minimum as an official bond yield quote.
What assumptions affect the result?
The model assumes a fixed coupon, equal payment periods, whole years to each outcome, and a redemption immediately after the final modeled coupon. It treats the purchase price as the amount paid and does not add accrued interest. Actual yield calculations can depend on settlement date, coupon schedule, day-count convention, fees, price adjustments, and security-specific provisions. FINRA advises investors to consider broker compensation and charges when assessing yields.
The calculation also assumes payments occur as scheduled. It does not model missed payments, issuer default, taxes, changing market prices, call likelihood, or reinvestment of coupon and redemption proceeds. Verify the result with the bond documents and a broker calculation that reflects the trade’s settlement and applicable conventions.
Sources and date: Fidelity’s bond offering information defines yield to worst as the lowest potential yield anticipated; FINRA Notice to Members 05-21 discusses maturity and call yield calculations and broker compensation. Accessed 2026-11-03.
This educational scenario tool is not a recommendation to buy or sell bonds and is not financial, tax, or legal advice.
Frequently asked questions
Does this find every possible call date?
No. It compares maturity with only the eligible dates and amounts you enter. Check the bond documents for the applicable redemption features.
Is the lowest result an official yield to worst?
No. It is the minimum among this calculator’s simplified scenarios. Settlement timing, partial redemptions, bond provisions, and market conventions may change an official calculation.
Does the issuer have to redeem the bond on an entered call date?
No. The entered date and amount describe a scenario. The calculator does not estimate whether an issuer will exercise an option.
Are accrued interest and transaction fees included?
No. The entered purchase price is treated as the amount paid. Accrued interest, commissions, markups, taxes, and other costs are excluded.