YTM=[C+((F−P)/n)] / [(F+P)/2]
or
.............C + (F/n - P/n)
YTM = -----------------------
..................F/2 + P/2
Whichever you prefer.
YTM = estimated total $ if you hold the bond for its life
C = Coupon payment*
F = face value of the bond**
P = price of bond***
n = the number of years to maturity
* The amount of interest the bond holder gets every year. First column in all tables here.
** The full value of the bond after maturity.
*** Initial cost of the bond, i.e. what the buyer paid at purchase. This is almost always $1,000 multiplied by the price percentage. $1,000 is what is known as par value.
Disclaimer: my mother-in-law is an accountant. I am not. I've never actually had to do this math, in or out of school. Good luck
This post was edited by Zhon on Mar 14 2017 09:37pm