Ytm -

YTM≈C+F−PnF+P2cap Y cap T cap M is approximately equal to the fraction with numerator cap C plus the fraction with numerator cap F minus cap P and denominator n end-fraction and denominator the fraction with numerator cap F plus cap P and denominator 2 end-fraction end-fraction : Coupon payment : Face value : Current market price : Years to maturity For example, if you buy a bond for with a face value of , a coupon of years remaining, the formula helps you see the "gain" of (the discount) spread over the Key Factors Influencing YTM

: Whether the bond was bought at a discount or premium. YTM≈C+F−PnF+P2cap Y cap T cap M is approximately

: The remaining years until the principal is repaid. The Mechanics of YTM When bond prices go down , the YTM increases

One of the most vital concepts in bond investing is the inverse relationship between price and yield: When , the YTM decreases . When bond prices go down , the YTM increases . How to Calculate YTM

: The amount the issuer will pay back at maturity.

This happens because the bond’s coupon payments are fixed; if you pay more for those fixed payments (a premium), your overall percentage return (yield) drops. How to Calculate YTM