Yield to Maturity

Yield to maturity means the total return an investor can expect if a bond is held until it matures, assuming payments are made as scheduled. In simple terms, it shows the bond’s expected annual return until maturity. Yield to maturity is important because it helps investors compare bonds with different prices, coupons, and maturities. It includes both coupon payments and any gain or loss from buying the bond above or below face value. For example, a bond bought below face value may have a higher yield to maturity because the investor can receive both interest and price gain at maturity. Yield to maturity is not guaranteed if the bond is sold before maturity or if the issuer defaults.