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Medium · options_pricing · Quant Researcher interview question · yield_to_maturity, bond_pricing, newton_raphson, fixed_income, options_pricing
Yield to Maturity (YTM) is the total return anticipated on a bond if held until it matures, expressed as an annual rate. It is the internal rate of return (IRR) of a bond, equating the present value of all future cash flows to the current market price. Since the bond pricing equation is nonlinear, iterative numerical methods like Newton-Raphson are required to solve for YTM, a fundamental task in fixed-income analysis. Task Implement the function yield_to_maturity(price, coupon_rate, face_value