Yield To Maturity
How to Calculate Yield to Maturity
Calculating the yield to maturity is essential for anyone who wants to compare bonds and decide whether a particular bond they are considering will be a good investment.
When all else is equal, bonds with higher yields to maturity are a better investment than those with lower yields to maturity.
The yield to maturity—which is effectively an annualized rate of return—represents the level of return a bondholder can expect to receive. The yield to maturity and bond price are directly related to one another.
Understanding how to calculate yield to maturity will make it much easier for prospective investors to compare different types of bonds, such as coupon bonds versus zero-coupon bonds and bonds that have different lengths of time before maturity.
This brief guide discusses how to calculate yield to maturity with examples.
Yield to Maturity Calculator
