Yield-to-Maturity (YTM) is a crucial financial calculation that determines the return an investor can expect to earn on a fixed income security, such as a bond. It takes into account the security’s coupon rate and the present value of its future cash flows.
Understanding how to calculate YTM is essential for investors looking to maximize their returns. It allows them to compare different investment options and make informed decisions. Historically, YTM has been calculated using complex formulas and financial tables. However, with the advent of technology, there are now online calculators that make the process more accessible.