Yield to maturity is the yearly return you earn if you buy a bond at today's price, hold it to maturity, and every payment of interest and principal is made on time. It accounts for the price you pay, the coupons and the time to maturity.
If a 9% bond trades below its face value, its YTM is above 9%, because you also gain the difference at maturity. If it trades above face value, the YTM is below 9%. There is no simple formula: YTM is the rate that makes the present value of all future payments equal to the price paid (including accrued interest), found by trial and error.
YTM assumes the issuer pays everything on time. A very high YTM usually means the market doubts that.
Related
Related terms: Current yield · Coupon rate · Clean price and dirty price · Duration · Credit spread
Before investing, look up the issuer: all its outstanding bonds, rating history and disclosure documents.
This page is for information only. It is not investment advice, a credit rating or a recommendation to buy, sell or hold any security. Facts are taken from the issuer's own documents and the sources linked on this page; check them with the source before investing.
