Business, Legal & Accounting Glossary
The yield that would be achieved on a bond if it was held until maturity.
Yield to maturity, the most widely quoted yield for bonds, measures the total overall return.
A bond’s yield to maturity is the overall rate of return that the bond earns if purchased at today’s market price and held until its maturity date. Yield to maturity includes both the yearly interest the investor earns, and the difference between what the investor paid for the bond and the amount the investor receives at the bond’s maturity. Unless otherwise noted, yields are quoted for bonds on a yield to maturity basis. A bond’s yield to maturity can be calculated with a specialized bond calculator. Yield to maturity is often referred to as the yield or basis, so a 5.00% yield to maturity means the same as a 5.00% yield or a 5.00% basis. In addition to its yield to maturity, a bond’s yield can also be expressed in terms of its nominal yield, current yield, and yield to call.
Annual percentage yield
Average dividend yield
Bond equivalent yield
Capital gains yield
Constant maturity treasuries
Coupon equivalent yield
Dividend yield funds
Dividend yield stocks
Effective annual yield
Equivalent bond yield
Equivalent taxable yield
Flat yield curve
Flattening of the yield curve
High yield bond
Inverted yield curve
Liquid yield option note
Negative yield curve
Non parallel shift in the yield curve
Normal yield curve
Parallel shift in the yield curve
Positive yield curve
Potential average dividend yield
Projected maturity date
Pure yield pickup swap
Realized compound yield
Relative yield spread
Return to maturity expectations
Riding the yield curve
Steepening of the yield curve
Term to maturity
Time to maturity
Weighted average maturity
Weighted average portfolio yield
Weighted average remaining maturity
Yield curve option pricing models
Yield curve strategies
Yield spread strategies
Yield to call
Yield to call, option or event date
Yield to worst
Yield to maturity is the total earnings or return an investor anticipates earning from a bond assuming they keep it until it matures. This includes all interest and coupon payments as well as any premium or discount adjustments.
The yield to maturity of a bond is the total annual return on the bond if it is held until the maturity date. When a bond is purchased, it can either be sold at a discount or at a premium.
The par value of the bond, its market value, the yearly interest rate, the bond’s maturity in years, and the timing of coupon payments are all inputs to the calculation (such as quarterly, semi-annually, or annually). If a bondholder sells the bond before the maturity date, the yield to maturity on that investment may differ from the amount realised if the bond was held to maturity.
Several issues included in the yield to maturity calculation are as follows:
The calculation of yield to maturity can be performed manually, but requires a series of trial and error estimates to gradually refine the result. A much easier approach is to plug the necessary information into a formula in an electronic spreadsheet.
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This glossary post was last updated: 13th April, 2022 | 0 Views.