YTM (Yield to Maturity)
Private Equity glossary · Advanced LBO Modeling Mechanics & Deal Structuring
Definition
Discount rate equating bond price to present value of all cash flows.
YTM (Yield to Maturity) in plain English
A bond is basically an IOU: you lend a company money, and it promises to pay you set amounts on set dates. Yield to maturity is the single, honest "true interest rate" you actually earn if you buy the bond at today's price and hold it until the very end, counting every payment along the way. Here's the intuition: if a bond is on sale for less than its face value, your real return is higher than the printed interest rate — YTM is the one number that captures that. Formally, it's the discount rate that makes all those future payments, valued in today's dollars, add up exactly to the price you pay now.
Also called: Yield to Maturity
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