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.

Finally, add the two types of yield -- interest rate and bond price -- for each of the possible call dates as well as the maturity dates. Divide by the number of years to convert to an annual rate ...

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.

So we can calculate its current interest rate like this: If the bond is held to maturity, five years of interest would produce a 24.25% total yield.

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.

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.