Yield to Maturity
The total annualized return an investor earns if they hold a bond to maturity — accounting for coupon payments, price paid, and time remaining.
Price = Σ [C / (1+YTM)^t] + Face Value / (1+YTM)^n (solve for YTM)
Yield to Maturity (YTM) is the most complete measure of a bond's return. It is the single discount rate that equates the present value of all future cash flows (coupons + face value) to the current market price.
YTM assumes: (1) the investor holds the bond to maturity, (2) all coupon payments are reinvested at the same YTM rate. In practice, reinvestment rates vary — but YTM is still the standard measure for comparing bonds with different coupons, maturities, and prices.
When traders say a 10-year Treasury "yields 4.50%", they mean YTM is 4.50%. The entire yield curve is plotted using YTM.