Yield to Maturity Calculator
Yield to maturity is the total annual return a bond investor earns if the bond is held until it matures. It accounts for the current price, the coupon payments, and the difference between the price paid and the face value repaid at maturity. This uses the standard approximation formula, not an exact iterative solve, so it is close but not precise for large premium/discount bonds.
Estimate approximate YTM
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Approximate YTM
5.64%
The annual coupon is $50, and the discount or premium adds $5.00 per year in this approximation.
Breakdown
- Annual coupon
- $50
- Annual price adjustment
- $5.00
- Price
- $950
How the Yield to Maturity calculator works
Yield to maturity estimates the annualized return from buying a bond at the entered price and holding it until principal is repaid at maturity.
The calculator estimates annual coupon income, adds the annualized gain or loss between price and face value, and divides that by the average of price and face value.
coupon = face_value x coupon_rate
approximate_ytm = (coupon + (face_value - price) / years_to_maturity) / ((face_value + price) / 2)- This is the standard approximate YTM formula, not the exact discount-rate solve.
- Buying below face value raises YTM because the discount is earned over the remaining years.
- Buying above face value lowers YTM because the premium is lost over the remaining years.
When to use it
Helpful for
- Estimating a bond return when you plan to hold to maturity.
- Comparing bonds with different coupons and prices but similar maturity and credit risk.
- Seeing how a discount or premium changes return relative to coupon rate.
Can mislead when
- The bond is callable, distressed, floating-rate, or has unusual cash flows.
- The bond trades at a large premium or discount where the approximation is less precise.
- You expect to sell before maturity or reinvest coupons at materially different rates.
Common mistakes
- Treating approximate YTM as exact for bonds trading far from face value.
- Comparing YTM across bonds with different maturity or credit quality without adjusting for risk.
- Ignoring call features that can end the bond before stated maturity.
- Assuming the YTM will be realized if the bond is sold before maturity.
Worked example
The default inputs use a 1000 face value, 950 price, 5% coupon rate, and 10 years to maturity. Coupon is 50, the annual discount gain is 5, and approximate YTM is 55 divided by 975, or 5.64%.
| Input | Value |
|---|---|
| Annual coupon | $50 |
| Annual price adjustment | $5.00 |
| Approximate YTM | 5.64% |
Frequently asked questions
The coupon rate is fixed against face value, while yield to maturity reflects the return at the price you actually pay. Buying below face raises YTM above the coupon rate; buying above face lowers it.
Current yield is just annual coupon divided by price and ignores the gain or loss at maturity. YTM includes that price-to-face difference, so it is a more complete return measure.
Judge it against yields on Treasuries and other bonds of similar maturity and credit quality. A higher YTM offers more return but usually signals more credit or interest-rate risk, so "good" means well compensated for the risk taken.
This uses the standard YTM approximation formula. The exact yield requires solving for the rate that discounts all cash flows back to the price, which this tool approximates closely for typical bonds.
Compare yield with quality
Use the screener to compare financial strength and valuation before chasing yield.