How to Calculate a Yield to Maturity Loan
The yield on a variable-price loan or bond is calculated using the yield to maturity equation. This equation uses the current market price, the time to maturity of the bond, the payments and the face value of the bond in determining the bond's actual return rate. This equation is commonly used by investment firms to determine whether bonds are a good value in the general market and how to appropriately price the bonds in their inventory.
Other People Are Reading
Instructions
-
-
1
Subtract the face value (F) of the bond from the current market price (P). For example, if F is $100 and P is $90, then P - F = -$10.
-
2
Divide this value by the number of years to maturity (n), as in (F-P)/n. If n = 5, then (F-P)/n = -$2.
-
-
3
Add the interest payment (C) to this value, as in C +(F-P)/n. If C is $5, then C +(F-P)/n = $3.
-
4
Divide the combined amount from Step 3 by the price plus face value divided by 2, as in (C +(F-P)/n) / ((F+P)/2). That is, 3 divided by 95 ($100 plus $90 divided by 2) equals .0315789.
-
5
The final value from Step 4, multiplied by 100 to get a percentage, is the yield to maturity. Yield to maturity = (C +(F-P)/n) / ((F+P)/2). In the example, the yield to maturity equals 3.158 percent.
-
1
References
- Photo Credit
calculator chart image by max blain from
More Like This
d Mortgage d Investments f Lender 580esearche Index 5 Szh 408 Szh e Mortgage 3
4searchd Mortgage 2search283 Szh 9search50a Index 1 Investments 53 Mortgage c Www 1dsearch1 Mortgage 1 1010110A 6search3 1010110A a Lender 40034 63ca6e5c0b10d61ec657850d91244d2badcd6fb582eee251448fe4374cd12f2833945dad10531c01da141c6d33a04f034a3eb7de04578c422b36fb9f93ad2ef89c3617475 30b70e Investments 4
78c 63ca6e5c0b10d61ec657850d91244d2badcd6fb582eee251448fe4374cd12f2833945dad10531c01da141c6d33a04f034a3eb7de04578c422b36fb9f93ad2ef89c3617475 2searchb3fsearch9 63ca6e5c0b10d61ec657850d91244d2badcd6fb582eee251448fe4374cd12f2833945dad10531c01da141c6d33a04f034a3eb7de04578c422b36fb9f93ad2ef89c3617475 93
d2 Mortagagemortgagelender fsearch9c Php 6search7
7 Lender searchse Mortagagemortgagelender r Mortagagemortgagelender h Mortgage
0 search