How to Calculate Yield To Maturity of a Bond -What is YTM and How to Use the Approximation Formula

Рет қаралды 103,323

Күн бұрын

In this video I will teach you what Yield to Maturity is (YTM). I will show you how you can calculate YTM for premium bonds, discount bonds and for bonds bought at issue. This video will focus on how to use the approximation formula but will also mention at the end how to use the trial and error method. This video will include clear explanations (I've tried to make it as easy to follow as possible) and fully worked examples with step by step solutions. Hopefully this tutorial helps you and you can easily and quickly find the YTM of a bond.
0:00 Introduction to Bond Yield
1:40 Premium and Discount Bonds
5:02 Yield to Maturity Approximation Formula
6:29 How to Calculate YTM: Worked Examples
11:18 Intro to Trial and Error Method

Пікірлер: 57

@GotterVibez 2 ай бұрын

I listened 100 videos on this topic but this is the CLEAREST and the only one which helped me understand! Thanks :D

@Mauser_. 2 жыл бұрын

Watched many videos on this, yours is the clearest and easiest to understand. Thank you.

@suelow7603 2 жыл бұрын

Thank you! I had been doubling the number for N for semi annual payments. Now I see what I had been doing wrong. Thanks so much!

@bendonahower5325 Жыл бұрын

Explaining the premium and discount piece made this click for me. Thanks!

@EnlivenWellness Ай бұрын

Best video I’ve seen for this. Thank you!!!

@atifa8085 Жыл бұрын

Excellent video. Explained very well.

@jamesfallman5323 5 ай бұрын

Exceptional clarity! Thank you!:)

@natalieramirez3730 2 жыл бұрын

This helped a lot, thank you so much.

@kyleharvey4316 Жыл бұрын

Very helpful, thank you!

@marksowick5278 Жыл бұрын

It was very helpful and especially with what is going with SVB on 03/10/2023

@desertjedi 2 ай бұрын

As said just below, your video is the best at explaining all this. Thanks. One thing...none of my bonds were bought anywhere near the time when they were first issued. As such, I'm not sure how to tweak your formula for number of periods held instead of number of years. I then used Excel's RATE formula and it was spot on compared to a manual calculation of annualized yield.

@crazymemorial2943 7 ай бұрын

That's a great video to understanding for YTM

@SaeedG1999 2 жыл бұрын

Sir, I'm doing fin 222 in uowd and this was taught by my prof a few weeks ago and I couldn't understand it at all but your explanation is literally making me cry from relief 💀 thank you so much

@TheCompleteGuide1 2 жыл бұрын

Glad it helped and you understand it now

@SaeedG1999 2 жыл бұрын

@@TheCompleteGuide1 Passed it!

@TheCompleteGuide1 2 жыл бұрын

@@SaeedG1999 Great. Well done!

@luisluiscunha Жыл бұрын

Thank you, but you should use consistent casing for the letters. On the other hand, this the best explanation I ever seen. Congrats.

@garyfrankel9457 Жыл бұрын

Excellent, Thank you

@tpint5336 2 жыл бұрын

THANK YOU..... VERY MUCH !!!!!!!!

@dgfcl56ify 2 жыл бұрын

wonderful, thanks for the in-depth explanation!!

@tututaari4050 2 жыл бұрын

thank you so much it helped

@angelazhang9228 Жыл бұрын

really helpful, thansk

@cankose6967 Жыл бұрын

sick explanation

@Rubens.Costa_Music Жыл бұрын

Great vídeo, buddy!

@Diahann819 Жыл бұрын

I’m not your buddy, guy

@itsPhD 3 жыл бұрын

helped for my series 65

@fartsyfucksy 10 ай бұрын

thank u!!!!

@lataagarwal4918 Жыл бұрын

Can you please tell us how you got the formula that you have mentioned at 11:25 ?

@PunmasterSTP 2 жыл бұрын

YTM? More like TYSM! This was an excellent video; thanks for sharing.

@irmaknebioglu8462 4 ай бұрын

Can you explain the meanings and the calculations of the running yield and the holding period return?

@divermike8943 10 ай бұрын

So what if you buy the bond AFTER some the coupons have been paid to the previous owner. In the simple equation I'd expect that you just lower n to whatever payments are left. In the example, the bond pays 5 coupons, but if 2 of them have already been paid, then your n=3. But what does that do to more accurate equation which is already not easy to solve?

@actualnotanewbie 2 жыл бұрын

What if I'm trying to calculate annual payments instead of semi-annual payments?

@adityamisra7702 Жыл бұрын

just multiply it by 2 and u get the annual thing

@darrinh4854 2 жыл бұрын

Do you mean I can make profit if I buy lower than face value from stock market and hold to maturity?

@TheCompleteGuide1 2 жыл бұрын

Yes. However bonds trading below par are higher risk. Skilled distressed debt investors do very well.

@genemarcus7522 Ай бұрын

Question! C=$50, F=$1000, P=$900, n=5 . According to the formula that makes YTM as 7.37% and the profit as $368.50, but..... the actual profit is $350. How is that happened? Where are the $18.50 came from? Who is paying that difference? Am I doing something wrong?

@goofeybutreal4398 8 ай бұрын

❤👍🏿

@ruthlessluder Жыл бұрын

Sorry it's too deep for me. I'm shopping for a municipal bond. It says Current Yield = 4.966%, Yield to Maturity = 2.037%, Yield to Worst - 2.037%. If I buy the bond now and hold until maturity, I will get the 4.966%, right?

@PTCkknagarTRICHY Жыл бұрын

Yeah. But the returns are comparative values. For example, you might get better returns than this with some other bond after one year. At that time, this 4.966% will not be a good return.

@Clickbait-ej1nh Жыл бұрын

Isn’t this formula for approximate YTM ?

@jacobherr5903 2 жыл бұрын

So why would I buy a bond at a premium price?

@andypayne2743 2 жыл бұрын

I guess it would depend on the current bank interest rate/rate of inflation. If the interest rate in a savings account is running at 1% but a bond had a YTM of 3% you would be taking on more risk but get a higher return. Plus you have the potential of selling the bond on the secondary market and potentially making a profit if you did not hold to maturity.

@sonicsaiber6495 2 жыл бұрын

still confused. Why we divide numerator by 2?

@sedonaa 2 жыл бұрын

he did semi-annual payments

@natashalulu9400 Жыл бұрын

If you are talking about the APPROXIMATION, formula, he actually divided the bottom part, which is called the denominator rather than the numberator as you stated) , by 2 in the approximation formula. The reason he did this was that it was an APPROXIMATION formula, and he is just taking the AVERAGE of 2 TWO things, the face value of the bond and the Price you paid for the bond. ( ( FACE value plus PRICE you actually paid) divided by 2) is sort of an approximated, or estimated amount). I hope this helps.

@BigFish-ii8zd Жыл бұрын

You're already going wrong at 20 seconds in. Consider the following facts, (A) and (B). (A) At 00:17, you say it pays "semi-annually", that means "two payments per year". (B) Five seconds later you're saying "You're going to receive 5% payment each year, so it means in the first year you receive 50 dollars". (A) and (B) together are at the very least ambiguous (it's not clear what is meant), and possibly contradictory. Try to be clear in your explanations, and avoid confusion.

@jonathan2x660 Жыл бұрын

If the compounding period or pay period isn't stated it is always paid semi annually 1000 x 5% is 50 , 2 pays of 25

@rodneymwakota1904 10 ай бұрын

How did you get 5 % profit

@rodneymwakota1904 10 ай бұрын

250÷1250)×100%=20%

@tsunningwah3471 9 ай бұрын

bil

@nsshing 10 ай бұрын

Just in 2 years, bonds being sold in price less than face value is a norm lol

@MrsGG-id1os 6 ай бұрын

Nice to know

@wassimchebil1928 Күн бұрын

you can use Newton's method.

@alexperassolo3310 3 жыл бұрын

Screw Christ. I'm just kidding.

@alexb1312 Жыл бұрын

this is wrong

@user-ke5no2lw6o 4 ай бұрын

This video is so bad it only tells you how to calculate it without telling any definition or relationship. He didn't even tell us what's YTM. With this kind of teaching I may as well just plug everything in the formula and save 12 minutes