Yield to Maturity
What is Yield to Maturity?
The Yield to maturity of a bond or other fixed-interest security, such as gilts, is the internal rate of return earned by an investor who buys the bond today at the market price, assuming that the bond will be held until maturity, and that all coupon and principal payments will be made on schedule. The yield is ordinarily quoted without making any allowance for tax paid by the investor on the return, and is then known as “gross redemption yield”
The yield to maturity is not a paying yield, it is an general rate of return of the investment. If a person is not attempt current income, they can choose a below market coupon bond and buy it a dismiss. YTM uses all the components of a bond investment to come up with a true overall yield on the security.
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