How to Calculate Bond Yields to Maturity

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Calculating bond yields to maturity can be a complicated endeavor, so using an online bond calculator is the best route to get an idea of the long-term yield of a bond. Understand bond yields over time with financial advice from an experienced portfolio manager in this free video on investing.

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Video Transcript

How do you calculate a bond's yield to maturity? OK so the way we calculate a bond's yield to maturity or it's YTM is to take into consideration a lot of different things. The par value of the bond, about the price in which it will be redeemed. The coupon price or the current price on the market of that bond. The yield, that amount it's paying currently. And you're also looking for the time period because yield to maturity is generally a long term calculation. You're looking at the maturity of the bond when the bond is redeemed and you'll be looking at yield to maturity when you've bought the bond at something other than market, at par value rather at market price. So you may have bought the bond at a discount or premium and that will affect the yield to maturity, the eventual yield. It's a very long calculation, it's fairly complex and the best way to figure that out is really just to use a bond calculator. You can use that online and if you basically search for bond calculator or yield to maturity calculator you'll be able to go through that equation and it will take care of it for you in a second and you won't have to struggle though knowing the math. But it's really, it has to do with long term maturities on the bond, it's not something for a short term holding.


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