Yield to Maturity

[yeeld too muh-CHUR-uh-tee]

What is the definition of Yield to Maturity?

The total return anticipated on a bond if the bond is held until its maturity date, considering all payments of principal and interest, adjusted for any premium or discount to the face value of the bond.

Using Yield to Maturity in an Example

For a bond purchased at a discount with a face value of $1,000, an annual coupon rate of 5%, and a maturity of 10 years, the yield to maturity calculation would take into account the annual interest payments, the increase in bond value as it approaches its face value at maturity, and the total number of years until maturity.

Using Yield to Maturity in a sentence

The investor calculated the yield to maturity to determine if holding the bond until its maturity date would meet their expected rate of return.

Related Terms

Yellow Book

The 'Yellow Book' refers to the 'Government Auditing Standards' issued by the Comptroller General of the United States, which outlines the auditing standards for government organizations, programs, activities, and functions, as well as for entities receiving government assistance.

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Yield

The income return on an investment, such as dividends or interest, expressed as a percentage of the investment's cost or current market value.

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Yield Curve

A graph that illustrates the relationship between interest rates and the maturities of debt securities of the same credit quality, showing how these rates vary with different maturity dates.

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