Yield to Maturity Calculator
How to Use the Yield to Maturity Calculator
Enter the bond's face value, current market price, annual coupon payment and years remaining to maturity. This calculator uses a common approximation to estimate the annual yield an investor may earn if the bond is held until maturity.
Practical Example
A bond with a USD 1,000 face value, USD 950 market price, USD 50 annual coupon and 5 years to maturity has an approximate YTM of about 6.15% using the calculator's formula.
Factors That Affect the Result
Market price, coupon payments, time to maturity, reinvestment rates, credit risk and the approximation method can all influence the result. Exact YTM requires solving for the discount rate that matches all future cash flows to the current price.
Frequently Asked Questions
What does yield to maturity measure?
It estimates the annualized return from a bond if it is held to maturity and scheduled payments are received.
Is this YTM exact?
No. This version uses an approximation rather than an iterative discounted-cash-flow solution.
Why can YTM differ from current yield?
YTM also considers the difference between market price and face value plus the time remaining to maturity.
Methodology and Interpretation
Yield to maturity is the discount rate that equates a bond's price with the present value of scheduled cash flows, assuming payments occur as promised and coupons can effectively be reinvested at the yield. Credit risk, taxes and transaction costs are separate considerations.