Yield to Maturity



Yield to Maturity

When investors evaluate and trade bonds they commonly consider yield to maturity (YTM), which is the rate investors earn if they buy the bond at a specific price (Bo), and hold it until maturity. The yield to maturity on a bond with a current price equal to its par, or face, value will always equal the coupon interest rate. When the bond value differs from par, the yield to maturity will differ from the coupon interest rate. In other words, the current value (Bo), the annual interest, (I), the par value, (M), and the years to ...