Find out how to calculate the yield to maturity of a zero-coupon bond, and learn why this calculation is simpler than one with a bond that has a coupon.

Yield to Maturity is the estimated rate of return that an investor can expect from a bond. The value assumes that you hold the bond until maturity.

Yield to maturity (YTM) is the annual expected return of a bond if held until maturity, also referred to as book yield.

Yield to maturity (YTM) is the total return expected on a bond if the bond is held until maturity.

An implication of the above is that yield to maturity is also an indication of a bond fund's expected future dividend yield, assuming no changes in underlying conditions.

If a bond is "callable," it means that the issuer has the right to buy the bond back at a predetermined date before its full maturity date.

Step 3: Run an example Say you were evaluating a Treasury bill with a 26-week maturity and a price of $97.50. First, to calculate the bond's yield, subtract 97.5 from 100 and divide by 97.5.