Yield To Maturity (YTM)
Yield to Maturity (YTM) is the internal rate of return earned on a bond if it is held to maturity, assuming all coupon payments are reinvested at the YTM. It is the discount rate that makes the present value of the bond's future cash flows (coupons and principal) equal to its current price.
Example: An analyst notes that a 7-year bond with a 3% annual coupon trading at $970 has a YTM that reflects both the coupon payments and the expected redemption at maturity, assuming coupons are reinvested at the same rate.
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