Bond Yield to Maturity Calculator

YTM is the single annualized discount rate that equates the present value of all future coupon payments and the face-value repayment to the bond's current market price — in other words, your internal rate of return if you hold to maturity. It assumes all coupon payments are reinvested at the same YTM rate (a sometimes-unrealistic assumption in practice), and it accounts for both coupon income and any capital gain or loss from your purchase price.

A discount bond is priced below par because yields have risen since issuance. When you buy at $950 (par $1,000), you receive the $1,000 face value at maturity — an instant $50 capital gain on top of all coupon payments. This gain compounds your total return, pushing YTM above the coupon rate. The deeper the discount, the higher the YTM relative to the coupon.

Current yield = annual coupon ÷ price; it captures only the income component relative to what you paid. Current yield ignores the pull-to-par effect entirely. For a discount bond, current yield understates true return because it misses the capital gain. For a premium bond, current yield overstates return because it ignores the capital loss at maturity. YTM is the complete, honest return picture.

Most US Treasury and corporate bonds pay coupons twice per year (every six months). A bond with a 5% annual coupon and $1,000 face value pays $25 every six months = $50 annually. The YTM calculation uses periods matching the coupon frequency — semi-annual calculations use a 6-month compounding period, then annualize the result. Always match the calculator's frequency setting to your bond's actual payment schedule.

Yes, theoretically. If a bond's price is so far above par that coupon income doesn't offset the capital loss at redemption, YTM can be negative. This occurred with many European sovereign bonds during periods of negative central bank rates — investors accepted negative returns for safety. In the US, negative YTM is extremely rare for investment-grade bonds, but callable bonds bought above call price can exhibit negative YTM if redeemed early.

Duration measures a bond's price sensitivity to interest rate changes: a 7-year duration bond loses approximately 7% in value for every 1% rise in yields (and vice versa). Higher-YTM discount bonds have slightly shorter duration than equivalent premium bonds, because the capital gain at maturity arrives sooner (reducing effective time-weighted cash flow). Higher yields generally mean shorter duration — a key reason long-duration bonds are more volatile.