How to calculate Yield-to-maturity (YTM)?



To calculate Yield to Maturity (YTM) of a bond with semi-annual payments, we’ll need the following:

1. Face value of the bond (also called par value)
2. Annual Interest
3. Years to maturity
4. Market price of the bond

With these five items, we can calculate YTM using the following formula:

Yield to Maturity = [Annual Interest + {(Face value-bond Price)/Maturity}] /  [(Face value+bond Price)/2]

See also and article on what is yield spread and how does it affect your investments?.


YTM is the rate of return anticipated on a bond if the bond is held until maturity and if all payments are made as scheduled. The YTM calculation considers both the current market price of the bond and the coupon payments (if any) that the bondholder is scheduled to receive between now and maturity.

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