What Is Yield to Maturity (YTM)?
Yield to maturity (YTM) is the annualized return a bond investor would earn if the bond is bought at the current market price, all coupon payments are received on schedule, and the bond is held until maturity. It combines coupon income and the gain or loss between current price and face value into one rate.
For most investors, YTM is the best single summary measure of bond return because it reflects both cash income and price convergence toward par. If you need a broader fixed-income valuation workflow, use the Bond Calculator alongside this YTM tool.
Yield to Maturity Example
Suppose a bond has a face value of $1,000, a coupon rate of 5%, one coupon payment per year, and 1 year remaining to maturity. If the bond trades at $950, the annual coupon is $50 and the investor also gains $50 as the price moves from $950 to $1,000 at maturity.
Because the bond is trading below par, its YTM is higher than the coupon rate. That is why the sample inputs on this page produce a YTM of roughly 5.263% instead of exactly 5%.
YTM vs Current Yield
Current yield only measures annual coupon income relative to the bond's current price. YTM goes further by also including the capital gain or loss between the current price and the amount repaid at maturity.
| Measure | What it includes | Best use |
|---|---|---|
| Current yield | Coupon income only | Quick income comparison |
| YTM | Coupon income plus price change to maturity | Total bond return comparison |
For premium and discount bonds, YTM is usually more informative than current yield because it reflects the full economics of holding the bond to maturity.
Bond Price from Target Yield
This calculator also works in reverse. If you know the required return or target YTM, switch the tool to find Current Bond Price. The calculator will estimate the bond price implied by that yield, coupon schedule, and time to maturity.
That reverse mode is useful when screening bonds, checking whether a bond is overpriced or underpriced for your target return, or comparing how price changes as market yields move.
Zero-Coupon, Discount, and Premium Bonds
Zero-coupon bonds do not pay periodic coupons, so the investor's return comes entirely from the difference between purchase price and face value at maturity. The lower the bond price relative to face value, the higher the implied yield to maturity.
Discount bonds trade below par, which usually means the YTM is above the coupon rate. Premium bonds trade above par, which usually means the YTM is below the coupon rate. These relationships are useful when comparing quoted bond prices with the total return you would earn by holding the bond to maturity.
Yield to Maturity Calculator FAQ
What does yield to maturity mean?
Yield to maturity (YTM) is the annualized return an investor would earn if the bond is bought at the current price, all coupon payments are made as scheduled, and the bond is held until maturity. It combines coupon income and the gain or loss between market price and face value.
What is the difference between YTM and current yield?
Current yield only looks at annual coupon income relative to the current bond price. YTM is broader because it also includes the effect of the bond moving toward face value by maturity. For discount or premium bonds, YTM and current yield can differ materially.
When should I use the reverse bond price mode?
Use the reverse mode when you have a target required return and want to know what bond price would match that YTM. This is useful for bond screening, valuation checks, and comparing whether the current market price is above or below your required return.
Does payment frequency affect YTM?
Yes. Annual, semi-annual, quarterly, and monthly coupon schedules change the timing of cash flows, which changes present value and the implied YTM. The calculator accounts for coupon frequency directly in both the YTM and reverse price calculation.
