InvestorQ : Can you explain what is YTM and why is it so popular in bonds?
swati Bakhda made post

Can you explain what is YTM and why is it so popular in bonds?

Answer
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Juvina Maggie answered.
1 year ago


The yield or the return on the instrument is held till its maturity is known as the Yield-to-maturity (YTM). It basically measures the total income earned by the investor over the entire life of the Security.

This total income consists of the following:

Coupon income: The fixed rate of return that accrues from the instrument

Interest-on-interest at the coupon rate: Compound interest earned on the coupon income

Capital gains/losses: The profit or loss arising on account of the difference between the price that is paid for the security and the proceeds received on redemption/maturity