Bond Yield to Maturity Calculator
Get a bond's YTM, its current yield, and the capital gain or loss yield that separates them — so you can see how much of your return is coupon income and how much is the price climbing back to par.
Bond YTM Calculator
Enter the bond's terms and what it costs today. The result splits yield to maturity into the part you earn from coupons and the part you earn from the price moving toward par.
Amount repaid at maturity — usually $1,000 per bond.
Pays $50.00 a year, split into 2 payments of $25.00.
A bond quoted at 95 costs $950.00 per $1,000.00 of face value.
How long until the issuer repays the face value.
Match how the bond pays. U.S. Treasuries and most corporates are semi-annual.
Yield to Maturity
5.66%
held 10 years to maturity
Current Yield
5.26%
$50.00 ÷ $950.00
Capital Gain Yield
+0.40%
$50.00 gain to par at maturity
5.26% current yield + 0.40% capital gain yield = 5.66% yield to maturity
You're buying at a discount ($950.00 < $1,000.00 par). The coupons alone pay 5.26%, and the $50.00 the issuer hands back above what you paid adds another 0.40% a year — together, a 5.66% YTM. That last piece only lands if you hold to maturity.
YTM is solved from the bond's full cash-flow schedule and assumes you hold to maturity and reinvest coupons at the same rate — the market convention, not a guarantee. The capital gain/loss yield is the leftover: YTM minus current yield.
A Bond's Return Has Exactly Two Parts
Every dollar a bond makes you comes from one of two places: the coupons the issuer pays along the way, and the difference between what you paid and the face value you get back at maturity. Yield to maturity is just those two sources added together and annualized.
Current yield + Capital gain/loss yield = Yield to maturity
Current yield is the easy half — annual coupon ÷ price. The capital gain yield is what's left over, and it's the half most quoted figures hide. A bond bought at a discount earns a positive capital gain yield, because the issuer repays more than you paid. A bond bought at a premium earns a negative one: you paid $1,080 and only $1,000 comes back, so that $80 has to be subtracted from your coupon income before you know what you really made.
Splitting YTM this way answers a question a single number can't. Of the two bonds below, one pays 4.35% in cash each year and yields 5.24% to maturity; the other pays 5.56% in cash and yields just 5.10%. The bond with the fatter income is the worse investment, and only the decomposition shows you why.
Worked Example: A Bond Bought at a Discount
A $1,000 corporate bond with a 4% coupon, eight years to maturity, semi-annual payments, trading at $920 because rates have risen since it was issued.
- Current yield — $40 ÷ $920 = 4.35%
- Capital gain yield — +0.89% a year, from the $80 the issuer repays above your price
- Yield to maturity — 4.35% + 0.89% = 5.24%
The coupons hand you $40 a year in cash. The other 0.89% is real money too, but you don't see a cent of it until the bond matures and the issuer wires back $1,000 for something you paid $920 for. Judge this bond on 5.24% if you plan to hold it. Judge it on 4.35% if you need the income now.
Worked Example: A Bond Bought at a Premium
Now a $1,000 bond with a generous 6% coupon and twelve years left, trading at $1,080 precisely because that coupon looks generous.
- Current yield — $60 ÷ $1,080 = 5.56%
- Capital loss yield — −0.46% a year, as the $80 premium erodes toward par
- Yield to maturity — 5.56% − 0.46% = 5.10%
This is the trap the decomposition exposes. The 6% coupon and the 5.56% current yield both look better than the discount bond above, and the bond is worse: 5.10% to maturity against 5.24%. You are being paid back your own premium in installments and calling it income. If the bond is also callable, check the yield to call before you buy — an issuer that redeems early can turn that slow erosion into an immediate loss.
Why Compounding Frequency Changes the Answer
The calculator asks how often the bond pays because YTM is solved from the actual schedule of cash flows, and a bond that pays twice a year hands you money sooner than one that pays once. Take the default bond — $1,000 face, 5% coupon, ten years, $950 — and the quoted YTM shifts with the frequency:
- Annual coupons — 5.67% YTM
- Semi-annual coupons — 5.66% YTM
- Monthly coupons — 5.66% YTM
The gap is small, and it moves in the direction that surprises people: more frequent coupons mean a slightly lower quoted yield for the same price, because getting your cash earlier is worth something, and the quote is a nominal rate compounded at that frequency. The practical rule is simple — match the frequency to how the bond actually pays, since that is the basis your broker quotes. For most U.S. bonds that means semi-annual. The same nominal-versus-effective distinction shows up in savings accounts, where daily vs. monthly vs. annual compounding separates the rate you're quoted from the return you get.
What the Capital Gain Yield Doesn't Promise
Annualizing the price gain makes it look like a steady drip of return, and it isn't. A price does not walk to par in equal yearly steps; it wanders with interest rates and only converges on face value at maturity. Hold the default $950 bond for a year with yields unchanged and it's worth about $954 — the capital gain yield showing up roughly on schedule. But a one-point move in rates will swing that price by many times $4 in either direction.
So the capital gain yield is a claim about what happens if you hold to maturity, not a forecast of next year's price. Sell early and you take whatever the market offers that day. The same caveat applies to the YTM itself, which assumes every coupon gets reinvested at the YTM rate — a convention that quietly does a lot of work in the number.
And before deciding a bond is where your safe money belongs, weigh the whole yield against the alternatives in HYSA vs. CD vs. index fund. A 5.24% YTM you must hold for eight years to fully collect is a different proposition from a rate you can walk away from tomorrow.
Related Tools & Articles
Bond Calculator
Price, yield, and income for a bond investment, in one place
Current Yield Calculator
Just the coupon-income half, from annual coupon ÷ market price
Daily vs. Monthly vs. Annual Compounding
Why payment frequency moves the yield you actually earn
HYSA vs. CD vs. Index Fund
Where a bond's yield sits against the other safe options
Frequently Asked Questions
What is capital gains yield on a bond?
Capital gains yield is the share of your return that comes from the price, not the coupons. It is yield to maturity minus current yield. Buy a $1,000 bond for $950 and the $50 the issuer eventually repays above your purchase price is a gain; annualized across the years you hold the bond, that gain is the capital gains yield. On a premium bond the figure is negative — a capital loss yield — because the extra you paid above par is never repaid.
How do you calculate current yield on a bond?
Divide the annual coupon payment by the current market price. A $1,000 face-value bond with a 5% coupon pays $50 a year; bought at $950, its current yield is $50 ÷ $950 = 5.26%. The coupon is fixed in dollars for the life of the bond, so the current yield rises as the price falls and falls as the price rises. It ignores maturity entirely, which is why it never tells the whole story on its own.
Does current yield plus capital gains yield equal YTM?
Yes — that is the definition of capital gains yield, and it is why the three numbers in this calculator always reconcile. Current yield captures the coupon income against the price you paid; capital gains yield captures the price movement toward par; yield to maturity is the sum. The identity is exact for a bond with annual coupons. With semi-annual or monthly coupons the quoted nominal YTM sits less than a basis point away from the exact one-year price change, because cash arrives sooner and compounds more often.
What compounding frequency should I use for a bond's YTM?
Use the frequency the bond actually pays. Almost all U.S. Treasuries and corporate bonds pay semi-annually, and brokers quote YTM on that basis, so semi-annual is the right default. Some municipal and international bonds pay annually. The choice moves the answer only slightly — a 5% bond at $950 with ten years left yields 5.67% on an annual basis and 5.66% semi-annually — but you want your number quoted the same way your broker quotes theirs.
Why is my bond's YTM higher than its coupon rate?
Because you bought it below par. The coupon rate is fixed against the $1,000 face value and never moves, but you paid less than $1,000 for the right to collect those coupons, so each one is worth more as a percentage of your money. On top of that, the issuer repays the full face value at maturity, handing you the discount back as a gain. Both effects push YTM above the coupon rate. When a bond trades above par, both reverse and YTM lands below the coupon.
Do I actually earn the capital gain yield every year?
Not evenly. The capital gain yield is an annualized figure, but the price does not climb toward par in a straight line, and it only converges on par at maturity. A $950 bond with a 5% coupon and ten years left is worth about $954 a year later if yields do not move, roughly a 0.4% price gain — but in the meantime rates can move the price far more than that in either direction. You lock in the gain by holding until the issuer repays face value. Sell early and you get whatever the market pays that day.
Is a higher YTM always better?
No. A higher yield is compensation for risk, and the market usually prices it that way. A corporate bond yielding well above a Treasury of the same maturity is paying you to take on default risk, and a callable bond's tempting yield can vanish if the issuer redeems it early. Compare a bond's YTM against a Treasury with the same maturity first, then ask what the extra yield is actually paying you for.