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16 November 2022

YTM Vs IRR | Difference | Comparison

YTM is necessary for bond analysis to determine the ultimate value of bond investments, which is the main key difference between YTM and IRR. The internal rate of return is often used to evaluate the relative value of projects. Every investor needs to be aware of these two key terms. But first, what exactly do YTM and IRR doIn this article, we'll compare and discuss the key differences between the two methods YTM Vs IRR. 

 Learn more about IRR Vs ROI 

What is YTM?

YTM stands for yield to maturity growth. It is a popular method for assessing bond properties and is effective. These features span a variety of areas, such as early redemption costs, interest payment frequency, maturity date, and even current coupon interest rates. 

Learn more about IRR Vs CAGR

What is IRR?

IRR stands for internal rate of return, it is a financial statistic that is used to calculate the profitability of possible investments. In a discounted cash flow analysis, the IRR is a discount rate that makes the net present value of all cash flows equal to zero.

Learn more about NPV Vs ROI

YTM Vs IRR | Difference between YTM and IRR:
  • YTM is known as Yield to Maturity and IRR is known as Internal Rate of Return.
  • Yield to maturity is used for evaluating bond features, whereas the internal rate of return helps assess the financial outcomes of a project or investment.
  • A benefit of YTM is that it helps the investors in comparing different securities and the advantage of the IRR method is that is more precise than accounting.
  • YTM is calculated using spreadsheet software, or a bond yield table can be used. At the same time, IRR can be quickly evaluated with the help of using the given formula on the programmable and online calculator.
  • Formula to calculate YTM = {[C+(FV-PV/t)]/{(FV+PV)/2} while the formula for calculating IRR is IRR={ Cash Flows/[(1+r)^i]} - Initial investment. 
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