How to Calculate Yield to Maturity With a Financial Calculator

How to Calculate Yield to Maturity With a Financial Calculator
A financial calculator comes in handy when calculating yield to maturity.

General Process

Solving the mathematical formula for YTM is cumbersome and difficult, but the calculation is simple with a financial calculator. Information about the current price, face value, years to maturity, and coupon rate or coupon payment are entered into the calculator’s time value of money functions. Solving for the interest rate provides the yield to maturity.

Example

Consider a bond selling for $857 (PV) with a semi-annual coupon payment of $25 (PMT), a $1,000 face value (FV), and 20 semi-annual periods (N) until maturity. Calculate the yield to maturity for this bond using the time value of money keys on a financial calculator and solving for the interest rate (I) of 3.507%. In this case, the interest rate is the semi-annual rate and can be multiplied by two for an annual rate of 7.01%.