Yield to Maturity (YTM) Calculator











Formula

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

\[ \text{Bond Price} = \sum_{k=1}^{n} \frac{CF}{(1 + r)^k} \]

where:

Description

The Yield to Maturity (YTM) is the internal rate of return of a bond investment if the investor holds it until it matures and reinvests the coupon at the same interest rate.

Example Calculation

Let's assume the following:

Step 1: Calculate the annual coupon payment:

\[ \text{Coupon Payment} = \text{Face Value} \times \text{Coupon Rate} = 1000 \times 0.05 = 50 \]

Step 2: Use the YTM formula to estimate \( r \) that satisfies the bond price equation.

For Bond A, the YTM is approximately 5.26%.