yeild to maturity

what r yeild to maturity and how its calculated?

Re: yeild to maturity

yield to maturity = (annual $ of interest paid) x (par value) / (current
bond price)

par value is the face value of the bond, or its price upon being newly
issued. Subsequently, the price will change with market conditions.

While it's fine to ask here, Google can help a lot with questions about
basic definitions like this one.

"ee000" <> wrote

> what r yeild to maturity and how its calculated?
>

Re: yeild to maturity

"Elle" <> wrote in message
news:qO%gf.4493$
> yield to maturity = (annual $ of interest paid) x (par value) / (current
> bond price)
>
> par value is the face value of the bond, or its price upon being newly
> issued. Subsequently, the price will change with market conditions.
>
> While it's fine to ask here, Google can help a lot with questions about
> basic definitions like this one.
>
Especially when the answers you get here can be so wrong.

Simple counter example: zero coupon bond.
Annual $ of interest paid = 0. But YTM != 0.

The basic idea of YTM is that this is the effective annual rate of return
you get on your money, assuming that you hold the bond until it matures.

You may get money from owning a bond in a couple of ways. You may get
interest payments (some bonds don't pay interest), and you usually get the
face value of the bond back when it matures.

Each of those payments has a present value (PV): assuming that you are
getting a rate r, then a future payment p is worth p/(1-r)^n, where n is the
number of years until you get the payment.

For example, suppose you are going to get a payment of $10 a year from now.
If we assume a rate of 5%, then the present value of that payment is
$10/(1-0.05)^1 ~= $95.

You can see that because, if you were to put $95 into a bank account paying
5%, then after a year, you would have $100 (approximately - I'm rounding
here).

Now, you take all the interest payments from the bond, and compute their
present value (algebraically, in terms of a rate r). Likewise, you compute
the present value of the bond payment when it matures. You add all of those
together, and that's the present value of the bond.

We haven't solved for the rate yet. But we know that the present value of
the bond is equal to what you would pay to buy it now. So now you have a
formula for present value, in terms of r, and you have what that formula
equals. Solve for r, and that is your YTM.

Here's a page that says essentially the same thing (but writes out some of
the algebra):


There is not a closed form for the solution (that is, given this equation
for r, there is no equation that says: r = xxx); it has to be solved by
trial and error. That's why there are calculators for this, and why the
formula given above is wrong.

(definition, and
statement that there is no closed form solution).

--
Mark Freeland

Re: yeild to maturity

You're in for it now.




"Mark Freeland" <> wrote in message
news:4384af8c$0$75790$
> "Elle" <> wrote in message
> news:qO%gf.4493$
>> yield to maturity = (annual $ of interest paid) x (par value) / (current
>> bond price)
>>
>> par value is the face value of the bond, or its price upon being newly
>> issued. Subsequently, the price will change with market conditions.
>>
>> While it's fine to ask here, Google can help a lot with questions about
>> basic definitions like this one.
>>
> Especially when the answers you get here can be so wrong.
>
> Simple counter example: zero coupon bond.
> Annual $ of interest paid = 0. But YTM != 0.
>
> The basic idea of YTM is that this is the effective annual rate of return
> you get on your money, assuming that you hold the bond until it matures.
>
> You may get money from owning a bond in a couple of ways. You may get
> interest payments (some bonds don't pay interest), and you usually get
> the
> face value of the bond back when it matures.
>
> Each of those payments has a present value (PV): assuming that you are
> getting a rate r, then a future payment p is worth p/(1-r)^n, where n is
> the
> number of years until you get the payment.
>
> For example, suppose you are going to get a payment of $10 a year from
> now.
> If we assume a rate of 5%, then the present value of that payment is
> $10/(1-0.05)^1 ~= $95.
>
> You can see that because, if you were to put $95 into a bank account
> paying
> 5%, then after a year, you would have $100 (approximately - I'm rounding
> here).
>
> Now, you take all the interest payments from the bond, and compute their
> present value (algebraically, in terms of a rate r). Likewise, you
> compute
> the present value of the bond payment when it matures. You add all of
> those
> together, and that's the present value of the bond.
>
> We haven't solved for the rate yet. But we know that the present value of
> the bond is equal to what you would pay to buy it now. So now you have a
> formula for present value, in terms of r, and you have what that formula
> equals. Solve for r, and that is your YTM.
>
> Here's a page that says essentially the same thing (but writes out some of
> the algebra):
>
>
> There is not a closed form for the solution (that is, given this equation
> for r, there is no equation that says: r = xxx); it has to be solved by
> trial and error. That's why there are calculators for this, and why the
> formula given above is wrong.
>
> (definition, and
> statement that there is no closed form solution).
>
> --
> Mark Freeland
>
>
>

Re: yeild to maturity

I've attempted to yield to maturity, but it hasn't worked....... obviously.

Happy Guy

Re: yeild to maturity

I know what you mean. My son claims he will never die. Healthy living is the
answer.
He's 35 or 36 (can never remember) and says, "so far so good".



"happy-guy" <> wrote in message
news:Z14hf.13866$
> I've attempted to yield to maturity, but it hasn't worked.......
> obviously.
>
> Happy Guy
>
>

Re: yeild to maturity

Ed wrote:

> I know what you mean. My son claims he will never die. Healthy living is the
> answer.

Reminds me of a line from the TV sitcom "Sanford and Son." The son
mentions a guy who lives a 100% healthy lifestyle, eats right and
exercises and all the rest of it. Sanford retorts: "What's he gonna do
when he's lying in a hospital bed, dying of nothing?"


--
Steven D. Litvintchouk
Email:

Remove the NOSPAM before replying to me.