Yield to Maturity Calculator

What is Yield to Maturity (YTM)?

Yield to Maturity (YTM) is the total annualized rate of return anticipated on a bond if it is held until its specified maturity date. YTM considers the coupon payments, the difference between the purchase price and face value, and the time remaining until maturity.

Yield to Maturity Formula

The exact YTM ($r$) is calculated by solving the bond pricing equation:

$$P = \sum_{t=1}^{N} \frac{C / f}{\left(1 + \frac{r}{f}\right)^t} + \frac{V_{\text{face}}}{\left(1 + \frac{r}{f}\right)^N}$$

Where:

• $P$: Current market price of the bond
• $V_{\text{face}}$: Par or face value of the bond
• $C$: Annual coupon payment ($V_{\text{face}} \times \text{coupon rate}$)
• $f$: Payment frequency (1 for annual, 2 for semi-annual, etc.)
• $N$: Total payment periods ($t_{\text{mat}} \times f$)

Approximate YTM Formula

For quick mental math or manual calculation, investors use the approximate YTM formula:

$$\text{YTM}_{\text{approx}} \approx \frac{C + \frac{V_{\text{face}} - P}{t_{\text{mat}}}}{\frac{V_{\text{face}} + P}{2}}$$

Check out our Yield to Call Calculator for callable bonds.