How to calculate Yield to Maturity PDF

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YTM calculation tutorial...

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How to calculate the Yield to Maturity of the Bond if Coupon Interest is Paid Annually Problem : Gold Inc. 11-year, $1,000 par value bonds pay 9 percent coupon. The market price of the bond is $1,100. Calculate the bond’s YTM (expected rate of return) if coupon is paid annually. Solution: Using Microsoft Excel Click Formulas - Choose type - Financial - Choose RATE)

The window of this function is opened. Use Nper is the total number of periods Nper=11 Pmt is the coupon payment made each period Pmt=90 PV is the price of the bond PV= -1100. When you use Microsoft Excel or a financial calculator, remember that outflows generally have to be entered as negative values. In general, each problem in Time Value of Money will have at least one cash outflow (as a negative value), and at least one cash inflow (as a positive value). This is comparable to buying the bond at some point in time (an outflow), and receiving coupon payments and part value at another time (an inflows). DO NOT USE $ OR COMMAS WHEN ENTERING THE VALUE FV is the par value of the bond FV= 1000 Type 0 ( the payment is made at the end of the period) Guess. Generally a guess between 10 and 100 percent will work. Note that if you didn’t assign a value to guess, it would begin calculations with a value of 0.1% or 10%. If it could not come up with the value for i after 20 iterations, you would receive the #NUM error message.

Please also note that the price of the bond should be entered as a negative value. You will receive the #NUM error message if you forgot minus in front of the price of the bond.

You should change Format – Cells to show more decimals:

Get the result 7.62%....