Bond Yield to Maturity (YTM)
Approximate the yield to maturity for a fixed-rate bond using the standard yield approximation formula. Supports annual and semi-annual coupon frequencies.
Results
What is it?
Yield to Maturity (YTM) is the total annualized return an investor earns if a bond is held until maturity and all coupons are reinvested at the same rate. It accounts for coupon income, capital gain or loss (the difference between purchase price and par), and the time value of money. This calculator uses the widely-accepted linear approximation formula which is accurate to within a few basis points for most bonds.
How to use
Enter the bond's current market price, face value, annual coupon rate, years remaining to maturity, and the coupon payment frequency. The calculator produces an approximate annualized YTM and the current yield for comparison.
Example scenario
A $1,000 par bond with a 5% coupon paid semi-annually is trading at $950 with 10 years to maturity. Periodic coupon = $25, total periods = 20. YTM ≈ [25 + (1000 − 950)/20] / [(1000 + 950)/2] × 2 × 100 ≈ 5.64%. The current yield is 5.26%, which is lower because it ignores the $50 capital gain at maturity.
Pro tip
The approximation formula tends to slightly underestimate YTM for deep-discount bonds and slightly overestimate for large premiums. For critical pricing decisions, use a financial calculator or iterative solver. Compare YTM across bonds with similar credit ratings and maturities for true apples-to-apples analysis.