Yield to Maturity Calculator
Solved by iteration, because it has no closed form.
Work out Yield to Maturity. Solved by iteration, because it has no closed form. States the assumption instead of hiding it.
Yield to maturity
5.66%
5.26% current yield · Trading at a discount — the coupon is below current market yields
Yield to maturity has no closed form — it is the internal rate of return on the bond's cash flows, so it is solved by iteration. This uses bisection, which cannot diverge, over the range a bond's yield can plausibly occupy. Current yield is only the coupon over the price and ignores the capital gain or loss at maturity. For a bond bought at a discount the true return is higher than the current yield suggests; at a premium it is lower. YTM accounts for both. Duration is the number to watch if rates move. It is the weighted average time to receive the cash flows, and it predicts price sensitivity directly — a bond with a duration of seven loses roughly 7% of its value for each percentage point rates rise.
How the Yield to Maturity Calculator works
Yield to maturity, current yield and Macaulay duration for a bond. YTM is the internal rate of return on the cash flows, so it is solved numerically — and duration is what tells you how the price moves when rates do.
Also known as: bond yield calculator · what is my bond actually yielding · ytm from price and coupon · bond duration and interest rate risk
Not financial advice. This calculator is for planning and illustration, not financial advice. Real products carry fees, taxes, and terms it does not model. Confirm figures with your lender or a qualified adviser before committing.
Frequently asked questions
What is yield to maturity?
The annual return if you hold the bond to maturity and reinvest the coupons at the same rate. It accounts for the coupon and for the capital gain or loss against the face value.
How is it different from current yield?
Current yield is just the coupon over the price and ignores what happens at maturity. A bond bought at a discount returns more than its current yield suggests; one bought at a premium returns less.
Why does YTM need to be solved numerically?
Because it appears inside a sum of discounted cash flows with no algebraic solution. This uses bisection, which cannot diverge, over the range a bond's yield can plausibly occupy.
What is duration for?
It predicts price sensitivity to interest rates. A bond with a duration of seven loses roughly 7% of its value for each percentage point rates rise — which is why long bonds fall so much harder than short ones.
Why do bonds trade above or below par?
Because the coupon is fixed and market yields are not. When rates rise, an existing bond's fixed coupon is worth less, so its price falls until its yield matches what is available elsewhere.
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