Yield to maturity: Difference between revisions
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Revision as of 16:43, 25 March 2013
(YTM). The measure of yield on a financial instrument - for example a bond - from the current date until maturity that takes into account the capital gain on a bond (or other financial instrument) trading at a discount, or the capital loss on a bond (or other financial instrument) trading at a premium.
Also known as Yield to redemption, or Redemption yield.
More specifically the return on a security held to maturity, taking account of the coupon and re-investment rates and the buying price compared to its face value. YTM assumes that all coupons are fully paid out on their due dates and reinvested at the same yield and that the principal is paid back in full upon maturity. It is an internal rate of return calculation performed on the security’s expected cash flows, including the initial investment outflow (= the current market value).
