 Part 1: The Yield to Maturity (YTM) and What It Means. • Part 2: How to Quickly Approximate YTM. • Part 3: How to Extend the Formula to Yield to Call and Yield. The bond is currently priced at a discount of \$, matures in 30 months, and pays a semi-annual coupon of 5%. Therefore, the current yield of the bond is (5% coupon x \$ par value) / \$ market price = %. To calculate YTM here, the cash flows must be determined first. The yield to maturity is found in the present value of a bond formula: For calculating yield to maturity, the price of the bond, or present value of the bond, is already known. Calculating YTM is working backwards from the present value of a bond formula and trying to determine what r is. Author: Zaria Fadel Country: Estonia Language: English Genre: Education Published: 23 February 2015 Pages: 380 PDF File Size: 41.5 Mb ePub File Size: 29.67 Mb ISBN: 334-2-27233-400-1 Downloads: 89915 Price: Free Uploader: Zaria Fadel Yield to Maturity (YTM) Definition | Formula | Example | Limitation

Uses of Yield to Maturity YTM Yield to maturity can be quite useful for estimating whether or not buying a bond is a good investment. An investor yield to maturity formula often determine a required yieldor the return on a bond that will make the bond worthwhile, which may vary from investor to investor.

Once an investor has determined the YTM of a bond he or she is considering buying, the investor can compare the YTM with the required yield to determine if the bond is a good buy.

Yet, yield to maturity has other applications as well.

Variations yield to maturity formula Yield to Maturity YTM Yield to maturity has a few common variations that are important to know before doing research on the subject.

One such variation is Yield to call YTCwhich assumes that the bond will be calledthat is, repurchased by issuer before it reaches maturity, and thus, has a shorter cash flow period.

• Yield to maturity - Wikipedia
• Yield to Maturity (YTM) | Definition | Formula |Method | Example | Approximation | Excel
• Yield to Maturity (YTM)
• Definition

Another variation is Yield to put YTP. We keep narrowing down until we get the discount rate which exactly reduces the left hand side of the bond price equation to current bond price. For Company D's bond this rate is 4. For calculating yield to maturity, the price of the bond, or present value of the bond, is already known.

Calculating YTM is yield to maturity formula backwards from the present value of a bond formula and trying to determine what r is. Yield to Maturity Equation One basic formula yield to maturity formula calculating yield to maturity looks like this: The equation to find the yield looks like this: Let's break it down into parts so we can solve it.

The nice part is that all yield-to-maturity problems have basically the same form, so people have been able to create programmable calculators and computer programs and even tables back yield to maturity formula the old days to help you find r.

What is the YTM? If you want, you can plug this number back into equation 2, just to make sure it checks out.