Yield To Maturity (YTM)

The total return expected from holding a bond until maturity.

QUICK ANSWER

Yield To Maturity is the total expected return on a bond if it is held until it matures, accounting for interest payments and price differences.

In depth

Yield To Maturity is a comprehensive measure of a bond’s return, considering its current market price, coupon payments, and time to maturity. It assumes that all payments are made as scheduled and reinvested at the same rate. YTM helps investors compare bonds with different prices and interest rates. While more relevant for investors than startups directly, founders managing treasury or surplus cash may consider YTM when evaluating fixed-income investments.

Example

Let’s consider a real-world example of bond return.

Bond price: $900
Face value: $1,000
Annual interest: $50
Time to maturity: 5 years

YTM reflects the total return from interest plus the $100 gain at maturity.