Groundlearn / Glossary / Yield to maturity
Yield to maturity (YTM)
Also called YTM, redemption yield. A CFA and FRM term, defined in plain English with the distinction examiners test.
What it means
The single discount rate that equates a bond’s price to the present value of its cash flows.
The exam angle
Assumes every coupon is reinvested at the YTM and the bond is held to maturity. Both assumptions usually fail, which is why realised return differs from YTM.
Where it appears in the syllabus
- Fixed IncomeCFA Level I · exam weight 11–14% · Pricing, yield measures, duration, convexity, credit spreads.
- Valuation & Risk ModelsFRM Part I · exam weight 30% · VaR and ES, option valuation, bond risk, stress testing, credit and op risk.
Related terms
- ConvexityThe curvature of the price–yield relationship — how duration itself changes as yields move.
- DurationThe sensitivity of a bond’s price to a change in yield, and equivalently the weighted average time to receiving its…
- Forward rateThe interest rate agreed today for borrowing or lending over a future period, implied by today’s spot curve.
- Modified durationThe approximate percentage change in a bond’s price for a one percentage point change in yield.
- Spot rateThe yield on a single cash flow received at one future date, with no intervening coupons.
- Yield curveThe relationship between yield and maturity for bonds of the same credit quality.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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