A bond with a 5% YTM should yield a 5% annual return if held until the date of maturity.
What is the formula for yield to maturity?
What is the yield to maturity formula? The YTM formula looks like this: YTM is calculated as follows: APR + ((Face value - current market price)/number of years to maturity). Next, divide that amount by (Face value plus market price) / 2.
What makes yield to maturity crucial?
The main benefit of yield to maturity is that it allows investors to compare various securities and the returns they might anticipate from each. It is important for picking the securities to include in their portfolios.
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