# Talk:Yield to maturity

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## Need extra formula for YTM given lower reinvestment rate

The YTM article should have additional formula for reinvestment risk where the rate at which coupons are reinvested is different than the yield of the bond. A 30 year bond for example with a YTM of 5% would have a much much lower YTM if the coupons are reinvested at 1%. —Preceding unsigned comment added by 24.149.211.131 (talk) 16:28, 4 November 2009 (UTC)

Example seems to have been copied straight from http://www.hussman.net/html/longterm.htm —Preceding unsigned comment added by Chiao (talkcontribs) 06:54, 6 March 2008 (UTC)

## annual rate vs. period rate

Is yield to maturity always in effective annual rate or might be in form of effective period rate? Jackzhp 17:40, 13 October 2006 (UTC)

## How excel calculate bond price

PRICE is calculated as follows: Price=[redemption/(1+yld/frequencty)^(N-1+DSC.E)] +

```Sum (k=1 to N) (100*rate/frequency/(1+yld/frequency)^(k-1+DSC/E)) -
100*rate/frequency*A/E
```

where:

DSC = number of days from settlement to next coupon date.

E = number of days in coupon period in which the settlement date falls.

N = number of coupons payable between settlement date and redemption date.

A = number of days from beginning of coupon period to settlement date.

## Yield to Worst

The article currently defines this as: when a bond is callable, "puttable" or has other features, the yield to worst is the lowest yield of Yield to Maturity, Yield to Call, Yield to Put, and others. I have never seen such a definition before. YTW is the lowest yield that the holder of the paper can experience in the absence of default, interest rate moves, and stupidity. For instance, if the paper is puttable and trading at a premium to the put price, the result of this put will normally be discarded from consideration in the YTW calculation e.g., if the bond trades at \$110 with a \$100 put one month hence, you would normally ignore this put for YTW calculations, unless, for instance there was a call exercisable two months hence at \$90 ... in which case the put is important because the holder can use it to avoid a worse outcome. JiHymas@himivest.com 05:36, 1 November 2006 (UTC)

## Yield to Maturity

Consider a 30-year zero coupon bond with a face value of \$100. If the bond is priced at a yield-to-maturity of 10%, it will cost \$5.73 today (the present value of this cash flow). Over the coming 30 years, the price will advance to \$100, and the annualized return will be 10%.

This is incorrect. The 30-year zero coupon bond with a face value of \$100 will cost \$5.73 if the Annualized Internal Rate of Return is 10% ( = 1/1.1^30). If the Yield to Maturity is 10%, the price will be \$5.35 ( = 1/1.05^60)

See http://www.treasurydirect.gov/instit/statreg/auctreg/auctreg_gsrsixdec.pdf for US Treasury YTM conventions

jiHymas@himivest.com 216.191.217.82 (talk) 00:27, 23 November 2007 (UTC)

## Effective Annual Rate

The YTM is almost always given in terms of annual effective rate.

This is nonsense. YTM is, in fact, almost always given in terms of YTM - which is n times the periodic rate of return, where periods are defined by the cash flows of the instrument and n is the number of periods per year (two for almost all all government bonds). jiHymas@himivest.com 67.71.16.159 (talk) 16:56, 18 February 2008 (UTC)

The linked page from Calvert Online (http://www.calvert.com/incinv_6594.html) provides information that is imprecise at best. They refer to the "yield" (not the "yield to maturity") and the example shown evaluates "current yield", which is a different measure entirely. jiHymas@himivest.com 67.71.16.32 (talk) 12:41, 25 June 2008 (UTC)

If a bond's coupon rate is less than its YTM, then the bond is selling at a discount

Given that both the current price and maturity value of the bond need to be known in order to calculate the Yield-to-Maturity, wouldn't it be simpler to compare those two values? I recognize, of course, that the definition of Yield-to-Maturity as stated in the article is inaccurate, but the principle still holds.

The definition as currently given has the additional problem of not being clear when it comes to evaluating step-up bonds, which will be resolved by using a simple comparison of two prices. It might be worth-while to introduce the concept of notional value in order to bring perpetuals into the definition.

All the above is predicated on the assumption that an article on "Yield to Maturity (Wikipedia Convention)" really needs to define the terms discount and premium.

jiHymas@himivest.com 69.158.149.88 (talk) 05:39, 3 December 2008 (UTC)

## bond equivalent yield

The fact that YTM is almost ALWAYS quoted as ANNUALIZED bond-equivalent yield should be made a lot more clear! In the current version it is not as clear as it should be. i.e. whenver YTM is quoted, it almost ALWAYS understates the actual yield and is NOT "simply the discount rate at which the sum of all future cash flows from the bond (coupons and principal) are equal to the price of the bond". If a bond pays a 10% coupon paid semi-annually, the YTM would be quoted as 10%, which is very misleading (as somewhat described on the page). In this example the semi-annual IRR would be 5%, and in order to get in line with standard quotations, people simply multiply this times 2 in order to "annualize" it, but clearly the effective YTM should be 10.25%. — Preceding unsigned comment added by 159.53.174.141 (talk) 05:56, 11 November 2012 (UTC)

## Assessment comment

The comment(s) below were originally left at Talk:Yield to maturity/Comments, and are posted here for posterity. Following several discussions in past years, these subpages are now deprecated. The comments may be irrelevant or outdated; if so, please feel free to remove this section.

 I think that at the bottom of first paragraph it should say that 10.25% annual effective rate would be quoted as 5% instead of 10% because 0.010081648 monthly rate will compound to 1.05 in 6 months and to 1.1025 in 12 months

Last edited at 01:30, 3 October 2009 (UTC). Substituted at 11:04, 30 April 2016 (UTC)