How it works
Yield to maturity, or YTM, is the discount rate equating the bond's full price to its scheduled payments. The coupon rate is based on face value. Current yield divides annual coupon income by market price and omits the gain or loss toward redemption. These three figures are different measures.
Use the correct payment dates, coupon frequency and accrued interest. A quoted clean price can exclude interest accumulated since the last coupon, while the amount paid includes it. Comparing different quoting conventions without adjustment can create an apparent price difference that is not an economic opportunity.
Worked example
Assume a fictional bond with face value 1,000, one year remaining and one final payment of 1,050, consisting of principal plus a 50 coupon. There is no accrued interest today. At a 5% required annual yield, price is 1,050 / 1.05 = 1,000. At 8%, price is 972.22. Its coupon stays 5%; current yield becomes about 5.14%, not 8%.
Interpretation and limits
YTM assumes scheduled payments are made and is not a guaranteed realized return. For multi-payment bonds, a matching compounded outcome also depends on reinvestment; an early sale introduces another price. Credit changes, liquidity and embedded call rights can alter price independently of general interest rates. The simple inverse calculation holds cash flows fixed.
Chart practice
Check bond terms and yield conventions separately before inspecting available closed bars for a supported instrument. Student Wyckoff Pro analyzes charts; it does not infer a verified YTM, accrued interest or issuer credit quality from a price chart alone.
Primary sources
Sources explain the mechanics and limitations; the editorial examples use invented numbers rather than market quotations.
Your next practical step
Continue with analysis of available closed daily, weekly and monthly bars.
Open the first-chart instructions ↗