Estimate the total annual return of holding a bond to maturity, including the pull to par.
The approximation adds the annualised capital gain to the coupon and divides by the average of price and face value. It is accurate to a few basis points for typical bonds and avoids the iteration an exact solution needs. Yield to maturity is the only figure that lets bonds with different coupons and prices be compared, because it combines income and capital return.
Bond Yield to Maturity
Approximate YTM = (coupon + (face − price) ÷ years) ÷ ((price + face) ÷ 2)
Approximate YTM = (coupon + (face − price) ÷ years) ÷ ((price + face) ÷ 2) The approximation adds the annualised capital gain to the coupon and divides by the average of price and face value. It is accurate to a few basis points for typical bonds and avoids the iteration an exact solution needs.
Yield to maturity is the only figure that lets bonds with different coupons and prices be compared, because it combines income and capital return.
This calculator takes 4 inputs: Face value, Annual coupon rate, Current market price, Years to maturity. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.