Yield to maturity

The yield to maturity (YTM), book yield or redemption yield of a fixed-interest security is an estimate of the total rate of return anticipated to be earned by an investor who buys it at a given market price, holds it to maturity, and receives all interest payments and the capital redemption on schedule.^[1]^[2]

It is the theoretical internal rate of return, or the overall interest rate, of a bond — the discount rate at which the present value of all future cash flows from the bond is equal to the current price of the bond.^[3] The YTM is often given in terms of annual percentage rate (APR), but more often market convention is followed. In a number of major markets, the convention is to quote annualized yields with semi-annual compounding.^[4]

^ Thau, Annette (2001). The Bond Book (Revised ed.). New York: McGraw-Hill. p. 56. ISBN 0-07-135862-5.
^ Definition of 'Yield To Maturity (YTM)'
^ Fabozzi, Frank J. (1996). Bond Markets, Analysis and Strategies (third ed.). Upper Saddle River, NJ: Prentice Hall. p. 37. ISBN 0-13-339151-5.
^ Formulae for Calculating Gilt Prices from Yields

[1] Thau, Annette (2001). The Bond Book (Revised ed.). New York: McGraw-Hill. p. 56. ISBN 0-07-135862-5.

[2] Definition of 'Yield To Maturity (YTM)'

[3] Fabozzi, Frank J. (1996). Bond Markets, Analysis and Strategies (third ed.). Upper Saddle River, NJ: Prentice Hall. p. 37. ISBN 0-13-339151-5.

[4] Formulae for Calculating Gilt Prices from Yields

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