Par

How to calculate yield to maturity

Given a bond’s price, fYTM1/x finds the yearly return you lock in by holding it to maturity.

Problem

A 4.5% bond maturing on September 15, 2034 is quoted at 96.50. You buy it on April 21, 2026. What is its yield to maturity?

Keystrokes

  1. fREGCLx
    0.00

    Clears all registers.

  2. 96.5PV
    96.50

    The quoted price per $100, without accrued interest.

  3. 4.5PMT
    4.50

    The annual coupon rate.

  4. 4.212026ENTER
    4.21

    Settlement date.

  5. 9.152034fYTM1/x
    5.02

    Maturity date, then the yield.

Answer

The yield to maturity is 5.02%.

Why it works

YTM is the discount rate at which the remaining coupons and the $100 at maturity are worth exactly the price. Like IRR, it’s found by searching, so it can take a moment.

A price below 100 means a yield above the coupon: you earn the coupons plus the climb back to 100.

Questions

What’s the current yield?

The coupon divided by the price: 4.5 ENTER 96.5 ÷ 100 ×. It ignores the gain to 100 at maturity.

Related