TYBAF SEM V SUB - FINANCIAL MGMT. & MCOM SEM II SUB-CORPORATE FIN., TOPIC - YIELD TO MATURITY Part 2
Автор: Adhiraj Education
Загружено: 2025-09-12
Просмотров: 116
Hello students,
This topic include concept of YTM
part 1 Illustration - • TYBAF SEM V SUB - FINANCIAL MGMT. & MCOM S...
how to calculate the YTM by formula
YIELD TO MATURITY (YTM)
Yield to maturity (YTM) is the total return anticipated on a bond, if the bond is held until maturity. Yield to maturity is considered a long-term bond yield, but is expressed as an annual rate. In other words, it is the internal rate of return (IRR) of an investment in a bond, if the investor holds the bond until maturity and if all payments are made as scheduled.
Formula
I + (F-P)/n
YTM = --------------------
( F+P) / 2
Illustration 2
Calculate yield to maturity (YTM) of bond 'A’:
Annual Interest - 10%
Face Value - ₹100
Market price - ₹80
Life of bond - 10 years
If bond 'B' gives 16% YTM, which is better to invest?
Solution –
I = Annual interest payment = 10% of FV = 100*10% = 10
F = Redemption value of the bond = Rs. 100
P = Current Market price of the bond/Purchase price Rs.80
n = Years to maturity = 10 years
#YTM
#Redemption value
#market price
#Maturity period
#interest
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