Enter the annual interest payment, face value, current price, and years to maturity of a bond. The calculator will evaluate and display the yield to maturity.
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Yield to Maturity Formula
The following formula is used to calculate the yield to maturity of a bond or investment.
YTM = [ (AIP) + ( (FV – CP) / (Y) ) ]/ [( FV + CP ) / 2 ]
- Where YTM is the yield to maturity
- AIP is the annual interest payment
- FV is the face value
- CP is the current price
- Y is the years to maturity
Yield To Maturity Definition
Yield to maturity is the total monetary value a bond needs to reach in order for it to mature.
Yield To Maturity Example
How to calculate a yield to maturity?
- First, determine the annual interest payment.
Calculate the total annual interest payment.
- Next, determine the face value.
Calculate the face value of the bond.
- Next, determine the current price.
Calculate the current price of the bond on the market.
- Next, determine the years to maturity.
Measure the number of years remaining until maturity.
- Finally, calculate the yield to maturity.
Calculate the yield to maturity using the formula above.
A yield to maturity is a total value a bond must achieve in order to reach maturity.