yield to maturity
"Yield to maturity" (YTM) is a crucial concept in bond investing, representing the total return an investor can expect if the bond is held until its maturity date.
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Definition
C1Investing
(technical)The total return an investor expects from a bond if held until it matures, including interest and principal payments.
Example
- The yield to maturity on this bond is 5%, meaning if you hold it until it matures, your average annual return will be 5%.
C1Bond Valuation
(technical, academic)The internal rate of return on a bond, factoring in the coupon rate, face value, and current market price.
Example
- To compare different bonds, investors often look at the yield to maturity to understand the potential returns.
C2Financial Analysis
(technical)The discount rate at which the present value of a bond's cash flows equals its current market price.