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Put more emphasis on actual question and move backstory to the second role.
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edit approved Jul 18, 2017 at 11:10
Ivan Kolmychek
edit approved Jul 18, 2017 at 11:10
Ivan Kolmychek
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Hello all. My background is that I am going into a Finance Masters program after coming from a Math background, and, afterAfter some studies for the last month, I have encountered a concept that has just completely eluded me, and that is Yield to Maturity (YTM)Yield to Maturity (YTM).

Can someone explain the purpose and reasoning behind this concept?

My background is that I am going into a Finance Masters program after coming from a Math background.

I understand coupon rates, present value, maturity dates, and the general working of bonds and all that, but how does YTM work? Thehow does YTM work?

The general description my book uses is thisthis, which barely helps.:

Quote from book

The equation makes sense all right, but why would anyone need to figure out a discount factor (y in the equation) that makes the future cash flows of the bond equal to its price? In

In addition, what is even meant by the "bond price", as? As to this point in my studies only a bond's principal, face value, and par have ever been mentioned (and they're all the same thing)?.

I grasp that YTM is somehow supposed to account for other nominal yield calculations' deficiencies by incorporating Present Value, but it still confuses me. If someone could help explain the purpose and reasoning behind this concept to a bloke like me, I would be extremely thankful and in one's debt.

Hello all. My background is that I am going into a Finance Masters program after coming from a Math background, and, after some studies for the last month, I have encountered a concept that has just completely eluded me, and that is Yield to Maturity (YTM).

I understand coupon rates, present value, maturity dates, and the general working of bonds and all that, but how does YTM work? The general description my book uses is this, which barely helps.

The equation makes sense all right, but why would anyone need to figure out a discount factor (y in the equation) that makes the future cash flows of the bond equal to its price? In addition, what is even meant by the "bond price", as to this point in my studies only a bond's principal, face value, and par have ever been mentioned (and they're all the same thing)?

I grasp that YTM is somehow supposed to account for other nominal yield calculations' deficiencies by incorporating Present Value, but it still confuses me. If someone could help explain the purpose and reasoning behind this concept to a bloke like me, I would be extremely thankful and in one's debt.

After some studies for the last month, I have encountered a concept that has just completely eluded me, and that is Yield to Maturity (YTM).

Can someone explain the purpose and reasoning behind this concept?

My background is that I am going into a Finance Masters program after coming from a Math background.

I understand coupon rates, present value, maturity dates, and the general working of bonds and all that, but how does YTM work?

The general description my book uses is this, which barely helps:

Quote from book

The equation makes sense all right, but why would anyone need to figure out a discount factor (y in the equation) that makes the future cash flows of the bond equal to its price?

In addition, what is even meant by the "bond price"? As to this point in my studies only a bond's principal, face value, and par have ever been mentioned (and they're all the same thing).

I grasp that YTM is somehow supposed to account for other nominal yield calculations' deficiencies by incorporating Present Value, but it still confuses me.

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Coolio2654
Coolio2654
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Thorough Description of Yield to Maturity?

Hello all. My background is that I am going into a Finance Masters program after coming from a Math background, and, after some studies for the last month, I have encountered a concept that has just completely eluded me, and that is Yield to Maturity (YTM).

I understand coupon rates, present value, maturity dates, and the general working of bonds and all that, but how does YTM work? The general description my book uses is this, which barely helps.

The equation makes sense all right, but why would anyone need to figure out a discount factor (y in the equation) that makes the future cash flows of the bond equal to its price? In addition, what is even meant by the "bond price", as to this point in my studies only a bond's principal, face value, and par have ever been mentioned (and they're all the same thing)?

I grasp that YTM is somehow supposed to account for other nominal yield calculations' deficiencies by incorporating Present Value, but it still confuses me. If someone could help explain the purpose and reasoning behind this concept to a bloke like me, I would be extremely thankful and in one's debt.