yield to maturity

Yield to maturity

The percentage rate of return paid on a bond, note, or other fixed income security if the investor buys and holds it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity, and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.

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Yield to Maturity

The rate of return on a bond if it is held until maturity. This is expressed as an annual rate; the calculation of the YTM includes the coupon rate (if any), length of the bond, market value, and face value. Bond quotes are made in terms of the YTM, but an individual investor's yield may be different if he/she does not hold the bond, or if the bond is called before maturity.

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yield to maturity (YTM)

The annual return on a bond held to maturity when interest payments and price appreciation (if priced below par) or depreciation (if priced above par) are considered. When a bond sells at par, the yield to maturity is the same as the current yield because price appreciation or depreciation is zero if the security is held to maturity. Bond quotations are generally on a yield-to-maturity basis, although an investor who sells a bond before maturity may earn a yield different from the yield to maturity as calculated at the time the security was purchased. See also internal rate of return, maturity basis.

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Yield to maturity (YTM). Yield to maturity is the most precise measure of a bond's anticipated return and determines its current market price.

YTM takes into account the coupon rate and the current interest rate in relation to the price, the purchase or discount price in relation to the par value, and the years remaining until the bond matures.

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yield to maturity (YTM)

The internal rate of return of an investment, taking into consideration all incomes and expenses and their timing.

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Yield to Maturity

What Does Yield to Maturity Mean?

The expected rate of return on a bond if it is held until the maturity date; YTM is a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate, and time to maturity. It also assumes that all coupons are reinvested at the same rate. Sometimes YTM is referred to simply as yield.

Investopedia explains Yield to Maturity

An investor can approximate YTM by using a bond yield table. However, because calculating a bond's YTM is complex and involves trial and error, it usually is done with a programmable business calculator.

Related Terms:
• Bond
• Coupon
• Interest Rate
• Par Value
• Yield