Definition Of Yield To Maturity

Yield to maturity is the total earnings or return an investor anticipates earning from a bond assuming they keep it until it matures. Yield to maturity definition. For example if a bond is purchased at less than its maturity value the yield to maturity includes the annual interest plus the gain as the bond increases from the investment amount to the maturity value.

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It is also known as redemption yield.

Definition of yield to maturity. Yield to maturity ytm definition. Current market price 2. As the name suggests if an investment is held till its maturity date the rate of return that it will generate will be yield to maturity. Yield to maturity ytm is the annual return that a bond is expected to generate if it is held till its maturity given its coupon rate payment frequency and current market price.

Uses of yield to maturity ytm yield to maturity can be quite useful for estimating whether buying a bond is a good investment. This type of bond yield is long term and it is given in terms of the annual percentage rate. The total annual return on a bond investment if held to maturity. The discount rate at which the present value of a bond s coupon payments and maturity value is equal to its current market price.

The ytm is also referred to as book yield or internal rate of return. Information and translations of yield to maturity in the most comprehensive dictionary definitions resource on the web. Yield to maturity is essentially the internal rate of return of a bond i e. Calculation of ytm is a complex process which takes into account the following key factors.

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. In other words it refers to the returns that a bond will fetch considering all payments made on time throughout the life of the bond. An investor will determine a required yield the return on a bond. This includes all interest and coupon payments as well as any premium or discount adjustments.

Yield to maturity ytm is the expected return on a bond that an investor will receive if it is held until the maturity date of the bond. Yield to maturity definition. Meaning of yield to maturity. Yield to maturity is the most precise measure of a bond s anticipated return and determines its current market price.

Yield to maturity ytm otherwise referred to as redemption or book yield is the speculative rate of return or interest rate of a fixed rate security such as a bond. Yield to maturity ytm refers to the total return someone earns when he or she purchases a bond and holds it to the maturity date. Yield to maturity ytm. The ytm is based on the belief or understanding that an investor purchases the security at the current market price and holds it until the security has matured.

What does yield to maturity mean.