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Chapter 2
Yield to maturity
6.1 Yield to maturity
Debt Investors will provide finance to entities by acquiring debentures/loan stock/
loan notes/bonds.
Why will they want to part with their hard earned cash to invest?
They will want to make a return on their investment (profit on the money
they invested!).
Debt investors will assess the YIELD ON MATURITY (YTM) on an investment to
compare it to other investments and determine whether to invest in the debenture.
YTM
Irredeemable Redeemable
debt debt
Annual interest received
× 100 I.R.R Calculation
Market value
40
