[talkgold]

Yield to Maturity
The definition of this term is pretty much self explanatory. It is the return that is expected if you hold a bond until it matures. Yield to Maturity is expressed in annual terms (the percentage returned in 1 years time). The forumula used to determing the YTM includescurrent market price, par value, time to maturity and the coupon interest rate. Finding the YTM is actually more difficult then it seems, as it is done more on a trial and error basis. The easiest way to find the YTM is to use a bond/yield table.

[numericalexampledotcom]

If you can't find this bond/yield table you can also use a Bond calculator.

With this calculator you can either compute the market value (given the Yield to Maturity) or you can compute the Yield to Maturity (given the market value).

The calculator also computes the Modified Duration, a measure for how much the value changes if the Yield to Maturity of comparable bonds changes.