Yield to Maturity (YTM) Calculator

How to calculate Yield to maturity calculator?

Yield to maturity (YTM) is the approximate annual return a bond investor would receive if the bond is held to maturity, accounting for coupon payments and any capital gain or loss.

Key formula (approximate): YTM ≈ (Annual coupon + (Face value − Price) / Years to maturity) / ((Face value + Price) / 2)

Using the Yield to maturity calculator calculator: an example

Example values: Face value = $1,000, Market price = $950, Coupon rate = 5% (annual), Years to maturity = 5.

Step-by-step calculation:

1. Compute annual coupon: $1,000 × 5% = $50.
2. Compute annualized capital gain: (1,000 − 950) / 5 = $10 per year.
3. Sum coupon and gain: 50 + 10 = $60.
4. Divide by average price: 60 / ((1,000 + 950) / 2) = 60 / 975 ≈ 0.0615 → 6.15% (approximate YTM).

Frequently Asked Questions

What does YTM represent?

YTM is the bond's internal rate of return if held to maturity, combining coupon income and any capital gain or loss spread over the holding period.

Does coupon payment frequency affect YTM?

Yes. More frequent coupon payments change the timing of cash flows and therefore the effective yield; adjust calculations to the payment frequency for greater accuracy.

Is this formula exact?

The formula is an approximation that is quick and practical. For an exact YTM use a financial calculator or solve for the internal rate of return numerically.