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Definition: In bonds, this is the rate of return if the bond is held until maturity. It takes into account purchase price, redemption value, coupon rate, and time to maturity.
More in depth: The yield-to-maturity differs from coupon rate because it takes more factors into consideration. For example, if you paid $100 and purchased a $110 par value bond that matures in 1 year and pays an annual $10 coupon, your total return would be $20 ($10 from the value of the bond going up, $10 from the coupon payment). Thus, your yield-to-maturity would be 20%.
YTM's typically go up as interest rates rise. This is because the value of the bond declines so you can purchase the bond at a discount to its par value.
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