{"id":27435,"date":"2024-01-20T16:24:57","date_gmt":"2024-01-20T21:24:57","guid":{"rendered":"https:\/\/breakingintowallstreet.com\/?post_type=biws_kb&#038;p=27435"},"modified":"2024-08-14T06:23:44","modified_gmt":"2024-08-14T11:23:44","slug":"yield-to-maturity","status":"publish","type":"biws_kb","link":"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-maturity\/","title":{"rendered":"Yield to Maturity (YTM): Definition, Calculations, Meaning, and Excel Examples"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-flat ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Yield to Maturity (YTM): Definition, Calculations, Meaning, and Excel Examples<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-maturity\/#Yield_to_Maturity_Definition\">Yield to Maturity Definition<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-maturity\/#YTM_Formula_How_to_Calculate_the_Yield_to_Maturity_in_Excel\">YTM Formula: How to Calculate the Yield to Maturity in Excel<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-maturity\/#YTM_Formula_How_to_Calculate_the_Yield_to_Maturity_with_the_IRR_Function\">YTM Formula: How to Calculate the Yield to Maturity with the IRR Function<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-maturity\/#YTM_Formula_How_to_Calculate_the_Yield_to_Maturity_with_a_Quick_Approximation\">YTM Formula: How to Calculate the Yield to Maturity with a Quick Approximation<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-maturity\/#Limitations_of_the_%E2%80%9CApproximation_Method%E2%80%9D_for_the_Yield_to_Maturity\">Limitations of the &#8220;Approximation Method&#8221; for the Yield to Maturity<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-maturity\/#Current_Yield_vs_Yield_to_Maturity_vs_Yield_to_Call_vs_Yield_to_Worst\">Current Yield vs. Yield to Maturity vs. Yield to Call vs. Yield to Worst<\/a><\/li><\/ul><\/nav><\/div>\n\n<h2><span class=\"ez-toc-section\" id=\"Yield_to_Maturity_Definition\"><\/span>Yield to Maturity Definition<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<blockquote><p>The Yield to Maturity (YTM) of a bond is the annualized return an investor will receive if they buy a bond at its current market price and hold it until maturity, assuming the company makes all the required payments, and the investor reinvests the interest payments at the same rate as the overall return.<\/p><\/blockquote>\n<p>The YTM measures \u201cwhat should happen\u201d when an investor buys a bond \u2013 but often does not.<\/p>\n<p>In many cases, investors decide to sell bonds early because of changes in the macro environment or the company\u2019s credit profile.<\/p>\n<p>The YTM ignores all these possibilities and assumes that the investor <em>does<\/em> hold the bond until the official maturity date, at which point, the company repays it in full.<\/p>\n<p>Unlike metrics such as the <a href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/current-yield\/\" target=\"_blank\" rel=\"noopener\">Current Yield<\/a>, the Yield to Maturity measures <strong>the annualized return over many years<\/strong>.<\/p>\n<p>Unlike metrics such as the <a href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-call\/\" target=\"_blank\" rel=\"noopener\">Yield to Call<\/a> or <a href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-worst\/\" target=\"_blank\" rel=\"noopener\">Yield to Worst<\/a>, the Yield to Maturity <strong>assumes NO early repayment<\/strong>.<\/p>\n<div class='code-block code-block-2' style='margin: 8px 0; clear: both;'>\n<div class=\"kb-adinsert-modal\">\n    <div class=\"kb-adinsert-top\">\n      <div class=\"media\">\n          <img decoding=\"async\" class=\"alignnone size-full wp-image-28448\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/04\/24164120\/adv-fm-tile.png\" alt=\"PowerPoint Pro\" width=\"128\" height=\"128\" \/>\n      <\/div>\n      <div class=\"content\">\n          <h3>Master Financial Modeling for Investment Banking With <strong>BIWS Core Financial Modeling<\/strong><\/h3>\n      <\/div>\n    <\/div>\n    \n    <div class=\"full_text\">\n    \t<ul>\n        \t<li>\n            \t<h4>Become a financial modeling pro<\/h4>\n              <p>158 videos, detailed written guides, Excel files, quizzes, and more<\/p>\n\t\t\t    <\/li>\n          <li>\n          \t<h4>Complete 10+ detailed global case studies<\/h4>\n            <p>These include both the theory and the practical applications<\/p>\n\t\t\t    <\/li>\n          <li>\n          \t<h4>Prepare for your internship or full-time job<\/h4>\n            <p>Gain the skills you need to \u201chit the ground running\u201d on Day 1\n\n<\/p>\n\t\t\t  <\/li>\n      <\/ul>\n        \n      <a class=\"cta-link orange-button-medium\" href=\"https:\/\/breakingintowallstreet.com\/core-financial-modeling\/\" target=\"_blank\">Full Details<\/a>\n      \n      <a class=\"cta-link orange-button-medium bg-blue\" href=\"https:\/\/biws-support.s3.us-east-1.amazonaws.com\/Course-Outlines\/Core-Financial-Modeling-Course-Outline.pdf\" target=\"_blank\" rel=\"noopener\">Short Outline<\/a>\n    <\/div>\n<\/div><\/div>\n\n<p>The Yield to Maturity changes based on the bond\u2019s current market price, its coupon rate, the time until maturity, and the repayment probability \u2013 though this probability is assumed to be 100% for healthy companies.<\/p>\n<p>Here\u2019s a simple Excel example for the YTM calculation of a <strong>discount bond<\/strong> that trades at $900 vs. a par value of $1,000:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-27436 size-full\" title=\"YTM Calculation Example\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161250\/01-YTM-Calculation.jpg\" alt=\"YTM Calculation Example\" width=\"1514\" height=\"718\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161250\/01-YTM-Calculation.jpg 1514w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161250\/01-YTM-Calculation-300x142.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161250\/01-YTM-Calculation-1024x486.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161250\/01-YTM-Calculation-768x364.jpg 768w\" sizes=\"(max-width: 1514px) 100vw, 1514px\" \/><\/p>\n<h3><strong>Files &amp; Resources:<\/strong><\/h3>\n<p><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.us-east-1.amazonaws.com\/Debt-Equity\/Bond-Yield\/Yield-to-Maturity-Formula.xlsx\" target=\"_blank\" rel=\"noopener\">Bond Yields &#8211; Formulas and Examples (XL)<\/a><\/p>\n<p><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.us-east-1.amazonaws.com\/Debt-Equity\/Bond-Yield\/Yield-to-Maturity-Example-Calculations.xlsx\" target=\"_blank\" rel=\"noopener\">Yield to Maturity &#8211; Calculation Methods (XL)<\/a><\/p>\n<p>There are several ways to calculate or approximate the Yield to Maturity, which we\u2019ll describe below:<\/p>\n<h2><span class=\"ez-toc-section\" id=\"YTM_Formula_How_to_Calculate_the_Yield_to_Maturity_in_Excel\"><\/span><strong>YTM Formula: How to Calculate the Yield to Maturity in Excel<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The easiest method, by far, is to use the YIELD function in Excel, which accounts for all the assumptions mentioned above.<\/p>\n<p>We use this YIELD function in the screenshot shown above, and you can see it directly in the Excel download available on this page.<\/p>\n<p>The assumptions here are as follows:<\/p>\n<p><strong>Bond Price:<\/strong> $900 (vs. par value of $1,000, so it\u2019s trading at a 10% discount)<\/p>\n<p><strong>Coupon Rate:<\/strong> 5% (so, interest payments will be $1,000 * 5% = $50 per year)<\/p>\n<p><strong>Settlement Date (Purchase Date):<\/strong> December 31, 2024<\/p>\n<p><strong>Maturity Date:<\/strong> December 31, 2029 (5-year holding period)<\/p>\n<p>The output is as follows:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-27439 size-full\" title=\"YTM Output from the Excel YIELD Function\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161318\/02-YTM-Output-Excel-Formula.jpg\" alt=\"YTM Output from the Excel YIELD Function\" width=\"1398\" height=\"714\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161318\/02-YTM-Output-Excel-Formula.jpg 1398w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161318\/02-YTM-Output-Excel-Formula-300x153.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161318\/02-YTM-Output-Excel-Formula-1024x523.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161318\/02-YTM-Output-Excel-Formula-768x392.jpg 768w\" sizes=\"(max-width: 1398px) 100vw, 1398px\" \/><\/p>\n<p>The Excel function is:<\/p>\n<p>=YIELD (Settlement Date, Maturity Date, Coupon Rate, Bond Price % Par Value out of Number 100, 100, Coupon Frequency)<\/p>\n<p>The <strong>intuition<\/strong> here is that this 10% discount gives investors an \u201cextra boost\u201d over the 5% coupon rate.<\/p>\n<p>Since they hold the bond for 5 years, this 10% discount is spread out over 5 years, and since 10% \/ 5 = 2%, the annualized return is ~2% higher than 5% (it&#8217;s actually closer to ~2.5% higher due to compounding).<\/p>\n<h2><span class=\"ez-toc-section\" id=\"YTM_Formula_How_to_Calculate_the_Yield_to_Maturity_with_the_IRR_Function\"><\/span><strong>YTM Formula: How to Calculate the Yield to Maturity with the IRR Function<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Since the Yield to Maturity represents the <strong>annualized return<\/strong> on a bond, you can also use the Internal Rate of Return (IRR) function in Excel to calculate it.<\/p>\n<p>However, this approach takes far more time and effort because you must <strong>project the cash flows of the bond<\/strong>, including the initial purchase, the interest payments, and the repayment upon maturity.<\/p>\n<p>You can see our setup below:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-27440 size-full\" title=\"Yield to Maturity via the IRR Function\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161340\/03-Yield-to-Maturity-IRR-Function.jpg\" alt=\"Yield to Maturity via the IRR Function\" width=\"1438\" height=\"875\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161340\/03-Yield-to-Maturity-IRR-Function.jpg 1438w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161340\/03-Yield-to-Maturity-IRR-Function-300x183.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161340\/03-Yield-to-Maturity-IRR-Function-1024x623.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161340\/03-Yield-to-Maturity-IRR-Function-768x467.jpg 768w\" sizes=\"(max-width: 1438px) 100vw, 1438px\" \/><\/p>\n<p>Just like how the IRR in an <a href=\"https:\/\/mergersandinquisitions.com\/lbo-modeling-test\/\" target=\"_blank\" rel=\"noopener\">LBO model<\/a> tells you what a PE firm could earn, annualized, on its equity investment in a company, it\u2019s the same principle here with a single bond.<\/p>\n<p>Applying the IRR function to this stream of cash flows confirms that it\u2019s nearly the same as the output from the YIELD function:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-27441 size-full\" title=\"Yield to Maturity - Output from the IRR Function\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161940\/04-Yield-to-Maturity-IRR-Output.jpg\" alt=\"Yield to Maturity - Output from the IRR Function\" width=\"1386\" height=\"758\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161940\/04-Yield-to-Maturity-IRR-Output.jpg 1386w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161940\/04-Yield-to-Maturity-IRR-Output-300x164.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161940\/04-Yield-to-Maturity-IRR-Output-1024x560.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20161940\/04-Yield-to-Maturity-IRR-Output-768x420.jpg 768w\" sizes=\"(max-width: 1386px) 100vw, 1386px\" \/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"YTM_Formula_How_to_Calculate_the_Yield_to_Maturity_with_a_Quick_Approximation\"><\/span><strong>YTM Formula: How to Calculate the Yield to Maturity with a Quick Approximation<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Another option to calculate YTM is to skip Excel entirely and make a \u201cquick and dirty estimate\u201d using the following formula:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-27442 size-full\" title=\"Approximate YTM Calculation\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162015\/05-Approximate-YTM.jpg\" alt=\"Approximate YTM Calculation\" width=\"1318\" height=\"208\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162015\/05-Approximate-YTM.jpg 1318w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162015\/05-Approximate-YTM-300x47.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162015\/05-Approximate-YTM-1024x162.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162015\/05-Approximate-YTM-768x121.jpg 768w\" sizes=\"(max-width: 1318px) 100vw, 1318px\" \/><\/p>\n<p>We can apply this formula to the ongoing example here:<\/p>\n<p><strong>Annual Interest<\/strong> = $1,000 * 5% = $50<\/p>\n<p><strong>(Par Value \u2013 Bond Price)<\/strong> = $1,000 \u2013 $900 = $100<\/p>\n<p><strong>(Par Value + Bond Price) \/ 2<\/strong> = ($1,000 + $900) \/ 2 = $950<\/p>\n<p><strong>Approximate YTM<\/strong> = ($50 + $100 \/ 5) \/ $950 = $70 \/ $950 = ~7.4%<\/p>\n<p>To do the math quickly yourself, you can say: $50 + $100 \/ 5 = $70.<\/p>\n<p>Then, $950 is \u201chalfway\u201d between $1,000 and $900.<\/p>\n<p>$70 \/ $1,000 = 7%, so you can say that $70 \/ $950 is \u201cjust above 7%\u201d if you had to answer this question in an interview.<\/p>\n<p>The <strong>intuition<\/strong> for this formula is that the top part shows how much interest you are earning each year PLUS the \u201cannualized gain\u201d (if the bond is purchased at a discount) or MINUS the \u201cannualized loss\u201d (if the bond is purchased at a premium).<\/p>\n<p>Then, you divide by the \u201caverage price\u201d of the bond in the denominator to reflect how the interest + gain or loss are earned relative to this &#8220;average price&#8221; over the holding period.<\/p>\n<p>If you compare the numbers in Excel, you\u2019ll see that the approximate YTM is <strong>lower<\/strong> than the real YTM:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-27443 size-full\" title=\"Approximate YTM - Differential to Real YTM Numbers\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162108\/06-Approximate-YTM-Differential.jpg\" alt=\"Approximate YTM - Differential to Real YTM Numbers\" width=\"1380\" height=\"871\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162108\/06-Approximate-YTM-Differential.jpg 1380w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162108\/06-Approximate-YTM-Differential-300x189.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162108\/06-Approximate-YTM-Differential-1024x646.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162108\/06-Approximate-YTM-Differential-768x485.jpg 768w\" sizes=\"(max-width: 1380px) 100vw, 1380px\" \/><\/p>\n<p>This happens because of <strong>compounding<\/strong> (i.e., when you earn 10% on a $1,000 investment and re-invest it, you now start with $1,100 the next year rather than $1,000 \u2013 so the annualized gain or loss is not just a simple percentage divided by the years in the holding period, as the principal keeps increasing over time).<\/p>\n<p>The Excel YIELD and IRR functions account for compounding, but our approximation method does not.<\/p>\n<p>Also, this bond trades at a relative high discount of <strong>10%<\/strong> (it&#8217;s a high discount for a healthy, non-distressed company); this method is more accurate when the discount is much lower.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Limitations_of_the_%E2%80%9CApproximation_Method%E2%80%9D_for_the_Yield_to_Maturity\"><\/span><strong>Limitations of the &#8220;Approximation Method&#8221; for the Yield to Maturity<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In general, this trick works best for bonds that trade at a low premium or discount and mature soon (e.g., within ~5 years rather than 10 \u2013 15 years).<\/p>\n<p>The longer the holding period and the greater the discount or premium, the less accurate this formula will be.<\/p>\n<p>For example, if this bond traded at a <strong>50% discount<\/strong>, the YTM approximation would be far less accurate:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-27444 size-full\" title=\"Approximate YTM - Inaccuracies to the Real Yield to Maturity for a Deep Discount Bond\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162305\/07-Approximate-YTM-Inaccuracies.jpg\" alt=\"Approximate YTM - Inaccuracies to the Real Yield to Maturity for a Deep Discount Bond\" width=\"1404\" height=\"722\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162305\/07-Approximate-YTM-Inaccuracies.jpg 1404w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162305\/07-Approximate-YTM-Inaccuracies-300x154.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162305\/07-Approximate-YTM-Inaccuracies-1024x527.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/01\/20162305\/07-Approximate-YTM-Inaccuracies-768x395.jpg 768w\" sizes=\"(max-width: 1404px) 100vw, 1404px\" \/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Current_Yield_vs_Yield_to_Maturity_vs_Yield_to_Call_vs_Yield_to_Worst\"><\/span><strong>Current Yield vs. Yield to Maturity vs. Yield to Call vs. Yield to Worst<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>These yield metrics all measure the <strong>returns<\/strong> an investor can expect to receive on a bond, but they do it in different ways.<\/p>\n<p><strong>&#8211;<a href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/current-yield\/\" target=\"_blank\" rel=\"noopener\">Current Yield<\/a><\/strong>: This tells you the percentage investors would earn on a bond if they bought it today and <strong>held it for a year<\/strong>, factoring in the market price and the coupon rate on the bond.<\/p>\n<p><strong>&#8211;<a href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-maturity\/\" target=\"_blank\" rel=\"noopener\">Yield to Maturity<\/a><\/strong>: This gives the annualized return investors earn if they buy a bond at its current market price and <strong>hold it until maturity<\/strong>, assuming the company makes all the required payments and the investor reinvests the interest payments at the same rate as the overall return.<\/p>\n<p><strong>&#8211;<a href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-call\/\" target=\"_blank\" rel=\"noopener\">Yield to Call<\/a><\/strong>: This is similar to the YTM, but investors hold the bond only until <strong>an earlier call date<\/strong>, not the maturity date, and also receive some type of penalty fee paid by the company in exchange for this early repayment.<\/p>\n<p><strong>&#8211;<a href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/yield-to-worst\/\" target=\"_blank\" rel=\"noopener\">Yield to Worst<\/a><\/strong>: This is the lowest annualized return an investor might receive from buying and holding a bond until <em>either<\/em> early repayment <em>or<\/em> maturity, i.e., it is the <strong>minimum<\/strong> of all the YTCs and the YTM.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Yield to Maturity (YTM) of a bond is the annualized return an investor will receive if they buy a bond at its current market price and hold it until maturity, assuming the company makes all the required payments, and the investor reinvests the interest payments at the same rate as the overall return.<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-27435","biws_kb","type-biws_kb","status-publish","hentry","kb_category-debt-equity"],"acf":[],"_links":{"self":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb\/27435","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb"}],"about":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/types\/biws_kb"}],"wp:attachment":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/media?parent=27435"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}