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Rate to Yield Calculator

Formula

The formula to calculate the Yield to Maturity (YTM) is:

$\text{YTM} = \left[ \frac{C + \left(\frac{F - P}{n}\right)}{\frac{F + P}{2}} \right] \times 100$

Where:

$C$ is the Annual Coupon Payment ($)
$F$ is the Face Value of the Bond ($)
$P$ is the Purchase Price of the Bond ($)
$n$ is the Number of Years Until Maturity

What is Rate To Yield?

Rate to Yield, often referred to as Yield to Maturity (YTM), is a financial concept that calculates the total annual return an investor would receive if a bond or other fixed-income investment is held until maturity. It takes into account both the interest payments received periodically and any capital gain or loss that would be realized upon maturity or sale. This rate is expressed as an annual percentage and is used by investors to compare the potential returns of different fixed-income investments.

Example Calculation

Let's assume the following values:

Annual Coupon Payment (C) = $50
Face Value of Bond (F) = $1000
Purchase Price of Bond (P) = $950
Years to Maturity (n) = 10

Using the formula to calculate the Yield to Maturity (YTM):

$\text{YTM} = \left[ \frac{50 + \left(\frac{1000 - 950}{10}\right)}{\frac{1000 + 950}{2}} \right] \times 100 = \left[ \frac{50 + 5}{975} \right] \times 100 \approx 5.64\%$

The Yield to Maturity (YTM) is approximately 5.64%.