Yield to Maturity
Definition
What is Yield to Maturity?
The annualised returnA return converted into an equivalent yearly rate to make periods easier to compare. implied by a bond's price if held to maturityThe date when a debt investment's principal is scheduled to be repaid. and all promised payments occur and are reinvested as assumed.
Example in practice
How This Looks in Practice
A discount bondA bond trading below its face value. may have a yield to maturity above its coupon rateThe annual coupon amount expressed as a percentage of a bond's face value..
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Related Terms
Bond
A debt security through which an investor lends money to an issuer in return for promised payments.
Fixed IncomeIssuer
The government, company, or organisation that creates and sells a security.
Fixed IncomeFace Value
The principal amount stated on a bond and usually repaid at maturity.
Money MarketsTreasury Bill
A short-term government debt instrument usually issued at a discount and repaid at face value.