Difference between revisions of "Calculate Yield to Maturity"
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Yield to Maturity (YTM) for a bond is the total return, interest plus capital gain, obtained from a bond held to maturity. It is expressed as a percentage and tells investors what their return on investment will be if they purchase the bond and hold on to it until the bond issuer pays them back. It is difficult to calculate a precise YTM, but you can approximate its value by using a bond yield table or one of the many online calculators for YTM. | Yield to Maturity (YTM) for a bond is the total return, interest plus capital gain, obtained from a bond held to maturity. It is expressed as a percentage and tells investors what their return on investment will be if they purchase the bond and hold on to it until the bond issuer pays them back. It is difficult to calculate a precise YTM, but you can approximate its value by using a bond yield table or one of the many online calculators for YTM. | ||
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#Understand the limitations of yield to maturity. The YTM does not account for taxes or for purchasing or selling costs. These effectively lower the yield on a bond. Also, investors must remember that these calculations are estimates only. Fluctuations in the market can have significant effects on the bond yield.<ref name="rf3" /> | #Understand the limitations of yield to maturity. The YTM does not account for taxes or for purchasing or selling costs. These effectively lower the yield on a bond. Also, investors must remember that these calculations are estimates only. Fluctuations in the market can have significant effects on the bond yield.<ref name="rf3" /> | ||
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== Related Articles == | == Related Articles == | ||
