| Finance. the rate of return on a bond expressed as a percentage that accounts for the difference between the interest earned based on current market value and that earned if the bond is held to maturity. |
Yield To Maturity - YTM
The rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Sometimes this is simply referred to as "yield" for short.
Investopedia Commentary
An approximate YTM can be found by using a bond-yield table. However, because calculating a bond's YTM is complex and involves trial and error, it is usually done by using a programmable business calculator.
Related Links
Advanced Bond Concepts
Evaluating Bond Funds: Keeping It Simple
See also: Bond, Interest Rate, Maturity, Yield, Yield To Worst
Also spelled: YTM