How to Calculate a Bond's YTM

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Calculating a bond's YTM, or yield to maturity, is a long-term calculation best done by an online bond calculator. Find out a bond's yield to maturity with financial advice from an experienced portfolio manager in this free video on investing.

Part of the Video Series: Stocks & Investments
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Video Transcript

So how do you calculate a bond's YTM? Okay, 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, but the price at which it will be reviewed. The coupon price or the current on the market of that bond. The yield, the 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 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 a bond calculator, or a yield to maturity calculator, you'll be able to go through that equation, and it'll take care of it for you in a second, and you won't have to struggle through 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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