Yield to maturity

The Yield to maturity (YTM), book yield or redemption yield of a bond or other fixed-interest security, such as gilts, is the internal rate of return (IRR, overall interest rate) earned by an investor who buys the bond today at the market price, assuming that the bond will be held until maturity, and that all coupon and principal payments will be made on schedule.  Yield to maturity is the discount rate at which the sum of all future cash flows from the bond (coupons and principal) is equal to the price of the bond.  The YTM is often given in terms of Annual Percentage Rate (A.P.R.), but more usually market convention is followed.  In a number of major markets (such as gilts) the convention is to quote annualised yields with semi-annual compounding (see compound interest); thus, for example, an annual effective yield of 10.25% would be quoted as 10.00%, because 1.05 × 1.05 = 1.1025. 

Main assumptions

The main underlying assumptions used concerning the traditional yield measures are:

Yield to maturity

The Yield to maturity (YTM), book yield or redemption yield of a bond or other fixed-interest security, such as gilts, is the internal rate of return (IRR, overall interest rate) earned by an investor who buys the bond today at the market price, assuming that the bond will be held until maturity, and that all coupon and principal payments will be made on schedule.  Yield to maturity is the discount rate at which the sum of all future cash flows from the bond (coupons and principal) is equal to the price of the bond.  The YTM is often given in terms of Annual Percentage Rate (A.P.R.), but more usually market convention is followed.  In a number of major markets (such as gilts) the convention is to quote annualised yields with semi-annual compounding (see compound interest); thus, for example, an annual effective yield of 10.25% would be quoted as 10.00%, because 1.05 × 1.05 = 1.1025. 

Main assumptions

The main underlying assumptions used concerning the traditional yield measures are:

Latest News for: yield to maturity

Dear Mr. Berko.  I recently bought $10,000 of Tesla stock, and I hope I didn’t make a mistake, because it doesn’t pay a dividend.  I also intend to buy some of Tesla’s 5.375 percent bonds, which are due in 2025.  Ten of them will cost me $8,600, and they have a current yield of .......

Berko ... I also intend to buy some of Tesla's 5.375 percent bonds, which are due in 2025.  Ten of them will cost me $8,600, and they have a current yield of 6.25 percent.  So my combined Tesla investments will yield about 3 percent.  Could you explain, in simple English, how to figure the yieldtomaturity?  My stockbroker's eyes glazed over when I asked ......

The yieldtomaturity of the bonds is 6.7% at a price of 97.5% of Par, while the yieldtomaturity of PYS is around 10.30% at a price of 18.60 ... PYS is the same thing as the underlying bonds and has to trade at the same yieldtomaturity as the bonds because ... In short, it is a 6.7% bond substitute that gives you 10+% yieldtomaturity....

For some history on this debt, Tesla issued unsecured high yield $1.8B debt issuance back in August 2017 and was priced toyield 5.3% with a maturity of August 2025 ... Based on the above discussion, it would appear that buying the 2025 debt at the current yieldtomaturity would not be advisable for most individual investors at this point....

The returns you actually earn from the debt scheme may or may not be similar to the PortfolioYTM... Portfolio YTM (YieldtoMaturity) being one of them ... 1.Portfolio YTM gives a sense of overall interest rates prevalent in the debt market and returns that an investor can expect over a return horizon similar to portfolio average maturity....