Yield to maturity (YTM) is the internal rate of return on cash flows of a fixed income security, often a bond, if the security were to be held until maturity. It is a measurement of the return of the bond. This technique in theory allows investors to calculate the fair value of different financial instruments. The calculation of YTM is identical to the calculation of internal rate of return. If a bond's current yield is less than its YTM, then the bond is selling at a discount. If a bond's current y ...

Including:

• Yield to maturity - Example
• Yield to maturity - See

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Consider a 30-year zero coupon bond with a face value of $100. If the bond is priced at a yield-to-maturity of 10%, it will cost you $5.73 today. Over the coming 30 years, the price will advance to $100, and your annualized return will be 10%. But what happens in the meantime? Suppose that over the first 10 years of your holding period, interest rates decline, and the yield-to-maturity on your bond falls to 7%. With 20 years remaining to maturity, the price of the bond will be $25.84. Even though the yield-to-maturity for the remainin ...

See also:

Yield to maturity, Yield to maturity - Example, Yield to maturity - See

Read more here: » Yield to maturity: Encyclopedia II - Yield to maturity - Example