The formula to calculate the yield to worst (YTW) is:
\[ YTW = RFR + CRP \]
Where:
Yield to worst is defined as the sum of the risk-free rate and the credit risk premium of a bond. It’s equal to the lower of the yield-to-call and yield-to-maturity.
For example, if the risk-free rate (RFR) is 2% and the credit risk premium (CRP) is 3%, the yield to worst (YTW) can be calculated as follows:
\[ YTW = 2 + 3 = 5 \% \]
So, the yield to worst for these values is 5%.
