Yield to Maturity Yield to maturity is the discount rate at which the sum of all future cash flows from the bond are equal to the price of the bond. Key Terms purchasing power: Yield to maturity is the discount rate at which the sum of all future cash flows from the bond are equal to the price of the bond.
We try to find assets that have the best combination of risk and return. Technically, you could also use the IRR function, but there is no need to do that when the TVM keys are easier and will give the same answer. Are you a student?
The interest is 10 percent, and it will mature in 10 years. But wait a minute! Although this present value relationship reflects the theoretical approach to determining the value of a bond, in practice, the price is usually determined with reference to other, more liquid instruments.
To put it differently, the more frequent a bond makes coupon payments, the higher the bond price. Join the mailing list: