Talk:Yield to maturity

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Contents 1 attribution 2 annual rate vs. period rate 3 How excel calculate bond price 4 Yield to Worst 5 Yield to Maturity 6 Effective Annual Rate

[edit] attribution

Example seems to have been copied straight from http://www.hussman.net/html/longterm.htm —Preceding unsigned comment added by Chiao (talk • contribs) 06:54, 6 March 2008 (UTC)

[edit] annual rate vs. period rate

Is yield to maturity always in effective annual rate or might be in form of effective period rate? Jackzhp 17:40, 13 October 2006 (UTC)

[edit] How excel calculate bond price

PRICE is calculated as follows: Price=[redemption/(1+yld/frequencty)^(N-1+DSC.E)] +

Sum (k=1 to N) (100*rate/frequency/(1+yld/frequency)^(k-1+DSC/E)) -
100*rate/frequency*A/E

where:

DSC = number of days from settlement to next coupon date.

E = number of days in coupon period in which the settlement date falls.

N = number of coupons payable between settlement date and redemption date.

A = number of days from beginning of coupon period to settlement date.

[edit] Yield to Worst

The article currently defines this as: when a bond is callable, "puttable" or has other features, the yield to worst is the lowest yield of Yield to Maturity, Yield to Call, Yield to Put, and others. I have never seen such a definition before. YTW is the lowest yield that the holder of the paper can experience in the absence of default, interest rate moves, and stupidity. For instance, if the paper is puttable and trading at a premium to the put price, the result of this put will normally be discarded from consideration in the YTW calculation e.g., if the bond trades at $110 with a $100 put one month hence, you would normally ignore this put for YTW calculations, unless, for instance there was a call exercisable two months hence at $90 ... in which case the put is important because the holder can use it to avoid a worse outcome. JiHymas@himivest.com 05:36, 1 November 2006 (UTC)

[edit] Yield to Maturity

Consider a 30-year zero coupon bond with a face value of $100. If the bond is priced at a yield-to-maturity of 10%, it will cost $5.73 today (the present value of this cash flow). Over the coming 30 years, the price will advance to $100, and the annualized return will be 10%.

This is incorrect. The 30-year zero coupon bond with a face value of $100 will cost $5.73 if the Annualized Internal Rate of Return is 10% ( = 1/1.1^30). If the Yield to Maturity is 10%, the price will be $5.35 ( = 1/1.05^60)

See http://www.treasurydirect.gov/instit/statreg/auctreg/auctreg_gsrsixdec.pdf for US Treasury YTM conventions

jiHymas@himivest.com 216.191.217.82 (talk) 00:27, 23 November 2007 (UTC)

[edit] Effective Annual Rate

The YTM is almost always given in terms of annual effective rate.

This is nonsense. YTM is, in fact, almost always given in terms of YTM - which is n times the periodic rate of return, where periods are defined by the cash flows of the instrument and n is the number of periods per year (two for almost all all government bonds). jiHymas@himivest.com 67.71.16.159 (talk) 16:56, 18 February 2008 (UTC)