Yield to maturity

Yield to maturity (YTM) is the rate of return on cash flow of a fixed income security, often bond, if the security were to be held until it matures. It is a measurement of the performance of the bond. This technique allow investors to prepare the value of different financial instruments.

The calculation of YTM is identical to the calculation of Rate of Return.

If a bond's current yield is less than its YTM, then the bond is selling at an discount. If a bond's current yield is more than its YTM, then the bond is selling at an premium. If a bond's current yield is equal to its YTM, then the bond is selling on par.