Yield to Maturity Calculator

Yield to Maturity (YTM), also known as book yield or redemption yield, of a bond or other fixed-interest security. The yield to maturity (IRR) is nothing but the interest rate earned by an investor who buys the bond today at the market price, assuming that the bond is held until maturity and that all coupon and principal payments are made on schedule. In other words, the yield to maturity is the present value of the future cash flow that can be obtained by investment in the purchased bonds is equal to the discount rate of the bond’s current market price.

Typically, if a bond has a coupon rate which is:

  • Lower than the yield to maturity, the bond will be trading at discount.
  • Higher than the yield to maturity, the bond will be trading at a premium.
  • Equal to the yield to maturity, the bond will be trading at face value.

Yield to Maturity Formula

Approx YTM = { C + [ ( F - P ) / n ] } / [ ( F + P ) / 2 ]

where:

  • C = Coupon / Interest payment
  • F = Face value
  • P = Price
  • n = years to maturity

Yield to Maturity Example

Suppose you purchased a bond with a face value of $ 120, with a period of 7 years. The interest coupon rate is 12% and the issue price of the bond at 1000.

YTM = (C+ ((F-p)/n))/((F+P)/2) = 8.31

Yield to Maturity Calculators

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