Final answer:
The assertion that yield-to-call is always less than the yield-to-maturity and ignores interest payments is false. Yield-to-call factors in both call premium and interest payments, and its relation to yield-to-maturity can vary.
Step-by-step explanation:
The statement that the yield-to-call is calculated using the time to call and the par value of the bond and is based solely on the call premium, ignoring interest payments, is incorrect. The yield-to-call takes into account not only the call premium but also the interest payments received up to the call date.
The yield-to-call could be either less than or greater than the yield-to-maturity (YTM), depending on the bond's price relative to its par value and the size of the call premium.
Generally, if the bond is trading above par value (at a premium) and is callable at par, the yield-to-call will be less than the yield-to-maturity because the investor stands to lose part of the premium paid when the bond is called.
Conversely, if the bond is trading below par value and is callable above par, the yield-to-call can be higher than the yield-to-maturity because of the call premium. Therefore, the correct answer is False.
Yield-to-maturity, on the other hand, calculates the rate of return assuming the bond is held to its maturity date and all payments are made as scheduled. It incorporates the bond's current market price, its coupon payments, the time to maturity, and the redemption value at maturity. YTM reflects the bond's expected performance if it operates to term.