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translateGLOSSARY · FIXED INCOME

What is Yield to Maturity (YTM)?

YTM is the total annualised return an investor earns if a bond is held to maturity and all cash flows are reinvested at the same rate.

PrepClever Glossary · Fixed Income

updateUpdated July 2026

Formula

Price = Σ [Coupon ÷ (1+YTM)ᵗ] + [Face Value ÷ (1+YTM)ⁿ]

YTM is the single discount rate that makes the present value of a bond's future coupons and principal equal to its current market price. It is the bond market's standard measure of return and moves inversely to price.

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Example

A bond trading below face value has a YTM above its coupon rate, because the investor also gains from the price rising to par at maturity.

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Relevant NISM series

CFANISM Series XV

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Glossary

FAQs about Yield to Maturity (YTM)

How is YTM different from the coupon rate?add

The coupon rate is fixed on face value; YTM reflects the actual return based on the current market price, which changes as the bond trades above or below par.

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Yield to Maturity (YTM) is one term in a much larger syllabus. These are the fastest routes into the rest of it.

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What is Yield to Maturity (YTM)?

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FAQs about Yield to Maturity (YTM)

Where to go from here

Master every term that matters

What is Yield to Maturity (YTM)?

Related Terms

Duration

Credit Spread

Convexity

FAQs about Yield to Maturity (YTM)

Where to go from here

Master every term that matters