Yield to maturity, current yield, and duration.
Drop in the bond's terms and either its price or its yield. We solve the other side, derive current yield, and show how the price moves when rates do.
Built and reviewed by Stephen Omukoko Okoth
Mathematical Economist · ex-Morgan Stanley FI · Equilar
Inputs
The bond
Verdict
6.69% yield to maturity.
Current yield 6.32% • Duration 7.59 years.
Modified duration 7.35 — a 1% rate rise cuts the price ~7.3%, all else equal.
Result
The numbers
Yield to maturity
6.69%
Fair price
$ 950
Current yield
6.32%
Macaulay duration
7.59y
Sensitivity
Price vs ±200bps
Common questions
What is yield to maturity?
The single discount rate that makes a bond's price equal to the present value of its cash flows. It's the return you earn if you hold to maturity and reinvest coupons at the same rate.
Current yield vs YTM — what's the difference?
Current yield = annual coupon ÷ price. It ignores capital gain or loss at maturity. YTM accounts for both. For a bond bought at a discount, YTM is higher than current yield; for a premium bond, lower.
What is duration?
Macaulay duration is the weighted average time you wait for cash flows. It's also a sensitivity measure: a 1% rise in yields cuts the price by roughly the duration in percent. Higher duration = more interest-rate risk.
Does this work for T-bills?
Yes — set the coupon to 0 and the term to under a year. The YTM equals the discount yield. It works for any fixed-coupon, fixed-maturity bond: T-bills, corporates, sovereigns, infrastructure bonds.