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Yield to maturity is the total rate of return earned when a bond makes all interest payments and repays the original principal. YTM is essentially a bond's internal rate of return if held...
The yield to maturity (YTM) is the expected annual rate of return earned on a bond, assuming the debt security is held until maturity. The yield to maturity (YTM) is calculated by the following formula: [Annual Coupon + (FV – PV) ÷ Number of Compounding Periods] ÷ [(FV + PV) ÷ 2].
The formula’s purpose is to determine the yield of a bond (or other fixed-asset security) according to its most recent market price. The YTM calculation is structured to show – based on compounding – the effective yield a security should have once it reaches maturity.
The yield to maturity refers to the anticipated return of a bond at the time of its maturity rather than its present yield. To find a bond's actual yield to maturity, trial and error are needed to calculate different rates until the current value matches the market price.
Easily calculate the bond yields of your investment with our yield to maturity calculator. Employ the YTM formula for accurate real-time results.
The yield to maturity formula is used to calculate the yield on a bond based on its current price on the market. The yield to maturity formula looks at the effective yield of a bond based on compounding as opposed to the simple yield which is found using the dividend yield formula.
The yield to maturity of a bond is calculated using the earliest call or retirement date (YTM). It is assumed that a principal prepayment will occur if a bond issuer executes the call option. Frequently, the principal is returned, and the call marks the end of the coupon payments.
The bond yield to maturity formula needs five inputs, which you can find in our bond YTM calculator: Face value of the bond; Bond price; Annual coupon rate; Coupon frequency: the number of times the coupon is distributed in a year; and. Years to maturity.
Yield to maturity (YTM) formula. Calculating yield to maturity by hand requires the trial-and-error approach of plugging in discount rates back into the current price for a bond. But there’s a...
Updated March 10, 2021. What Is Yield to Maturity (YTM)? Also referred to as book yield and redemption yield, yield to maturity (YTM) is the total return that’s anticipated on a bond or other fixed-price security. The YTM is based on the assumption that the investor will purchase a bond and hold it until maturity.