A discount bond yield to maturity formula is a calculation used to determine the annual return of a bond that is purchased below its face value. For example, a $1,000 bond that is purchased for $900 would have a discount yield to maturity of approximately 6.38%, assuming a 10-year maturity date.
The discount bond yield to maturity formula is an important tool for investors, as it allows them to compare the returns of different bonds and make informed investment decisions. Some of the key benefits of using the discount bond yield to maturity formula include its simplicity, accuracy, and universality.