Yield to Put (YTP)
Yield assuming the bondholder exercises the put option at a specific put date and price.
YTP is the yield an investor would earn if they exercise the put option — selling the bond back to the issuer at a predetermined price (usually par) on a scheduled put date. Calculation is identical to YTC: Solve for the discount rate that equates the present value of cash flows up to the put date (plus the put price) to the market price. Puts protect the investor — if rates rise and bond prices fall, the holder can put the bond back at par. YTP is typically higher than YTM when the bond trades below par (the put is 'in the money'). Putable bonds trade at a premium to non-putable bonds because the embedded put option has positive value to the investor.
Formula