Bond Yield to Maturity Calculator

This calculator estimates a bond's yield to maturity using the standard approximation formula, and shows the annual coupon, the current yield and the total coupons you will receive. Enter the face value, the price you would pay, the coupon rate and the years left until maturity.

YTM is the figure to compare bonds on, because it counts both the coupon income and the gain (or loss) as a bond bought below (or above) face value moves to par at maturity. Brokers and the US Treasury quote yields this way, so you can line a corporate bond's YTM up against a Treasury of similar maturity to see the extra yield you are being paid for credit risk.

The approximation is usually within a few hundredths of a percentage point for bonds priced near par, but it drifts on long, deeply discounted bonds. To check a price for a given yield, use the bond price calculator.

The numerator is the average annual income: the coupon plus the discount (or minus the premium) spread evenly over the remaining years. The denominator is the average amount invested over the bond's life. This shortcut appears in most introductory finance textbooks.

Exact YTM is the discount rate that makes the present value of all coupons and the face value equal the price; it has no closed-form solution and is found by trial and error or with a spreadsheet's RATE or YIELD function. Exact YTM also assumes coupons are reinvested at the same yield. The formula does not handle callable bonds (use yield to call), floating-rate notes or bonds bought between coupon dates with accrued interest.

All three are quoted as percentages, but they answer different questions.

A YTM on its own does not say whether a bond is good value. Compare it with the yield on a US Treasury of similar maturity: the difference is the credit spread, the extra return paid for the risk the issuer defaults. Investment-grade corporates normally yield a modest spread over Treasuries, while high-yield bonds pay much more because defaults are more likely.

If a bond's YTM looks far higher than similar issues, the market may be pricing in trouble, and YTM assumes every payment arrives in full.

• Callable bonds: if the issuer can repay early, also work out yield to call by replacing face value with the call price and years to maturity with years to the call date. The lower of YTM and yield to call (yield to worst) is the conservative figure.
• Tax-exempt municipal bonds: compare them with taxable bonds on a tax-equivalent basis: municipal yield ÷ (1 − your marginal federal tax rate).
• Zero-coupon bonds: enter a 0% coupon; the approximation then reflects only the discount, but exact YTM for a zero is simply (F ÷ P)^(1/n) − 1.