Yield to Maturity Versus Rate of Return

Sigh, this person begins by conceding that YTM is very complex and misunderstood. Then he dives right into the formulas and jargon that make it so difficult to understand. Do any investment experts know how to talk to normal people? I'd recommend that he show this video to people who are not expert investors, then ask them questions to discover how much more they know afterward.

One other question:

Is the Y axis of typical yield curves YTM? Or something else?

Amortize the interest expense of a 10% 2-year bonds payable with a par value of 3,200 and quarterly payments, in return for cash of 3,081.52representing a market rate of 7%.pls, help me with its solution. Thanks

Hi, thanks for the great videos.

I have recently begun looking into the reinvestment rate assumption for IRR (similar formula as YTM) and it seems like it is a "fallacy", though I am not quite clear on why. Further, in a reply to Stefan Roco (below) you say that: "t is true that if you wish to interpret YTM as a rate of return you would have to assume some reinvestment rate (for every cash flow before maturity!)".

Does this mean that YTM is a rate of return measure that does assume that all coupons are reinvested at some stable rate (as unlikely as that it)?

Thank you.

So just to clarify.... it seems that YTM is "forward-looking" in that it just estimates the yield you need to have the PV of all future CF = the current price and the ROR is "backwards-looking" because it's taking as assumed that the bond-holder held the security until maturity and now is trying to figure out how much interest they earned each year? And is ROR the same thing as HPR except just held to the full maturity? (The calculation seems to be the same).

Thank you for the super informative video by the way!

I wish this is done in a more simple way.

I get confused when I see the performance document of debt funds. I mostly find that the YTM of debt funds is much lower than the trailing returns over the last 1 yr, 3yr, and 5 yr period of these funds. For e.g., YTM is around 4% while trailing returns for these periods is between 6%-7%. If I invest in such a debt fund now and wait for 3yrs will the annualized return that i would get be closer to YTM or to the respective trailing return? Is YTM really useful in estimating the returns I would get after x years? Can you please help?

YTM is calculated assuming each cash flow (coupon) will be reinvested at that same rate — which can be a very inaccurate assumption. Therefore, when there are more than one periods until maturity, YTM will be higher than the rate of return if you just assume that the “ending value” for rate of return is the sum of all coupons and par value.

Thank you. Why do other videos on this topic have 100k+ views and they have it wrong! Yours is more clearly presented, including the math, and it has the benefit of being right. The notion that YTM includes an assumption about the return on reinvested dividends seemed outlandish to me, so I figured something was wrong with those other explanations. Now I know.

Can someone tell me if ytm means total income percentage of the bond? Or is it annual income? I tried to figure a bond on Ameritrade and it just won't tell me how much I should expect to get after several years...

and how about risks ?
Let's consider two bonds with the same Maturity and Coupon payments one has a higher YTM than the other. Does it pay back higher returns (with higher risks) ?

this video good