yield to maturity

Noun

Meaning

(finance) The internal rate of return on a bond held to maturity, assuming scheduled payment of principal and interest.

(law) A calculation of yield on a bond that takes into account the capital gain or loss on a discount bond or capital loss on a premium bond. In the case of a discount bond, the yield-to-maturity, YTM, is higher than the current yield, or the coupon yield. The reverse is true for a premium bond with YTM lower than both current yield and coupon yield.

Synonyms

Examples

Figure 5. The lease escalators compound the return and convert an initial yield (in this example) of 3.5% into a 5.5% yield to maturity. Source: Internet

This can be demonstrated by looking at a past example, CUSIP 912810RA8, which originated at auction on February 21, 2013, with a real yield to maturity of 0.639%. Source: Internet

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