Yield to Maturity

 The bond prices are not quoted in dollars but in Yield To Maturity (YTM)

Yield to Maturity is defined as the rate of return such that if applied across all the maturities from Capital 1 to Capital T the price of the bond is equal to the discounted value of the cash flows paid by the bond.

Yield to maturity does not represent expected return on a Bond

Yield to Maturity is a complex weighted average of spot rates across maturities. Weighted average of interest rates.

Bond price is inversely related to Yield to Maturity

A bond sells at par meaning the price of the bond is equal to the principal payment if yield to maturity is equal to the coupon rate

A bond sells at discount if coupon rate is below Yield to maturity 

A bond sells at premium if its coupon rate is above Yield to Maturity 

y = Yield to Maturity

c = coupon rate

Bond Price (B) = c/y  +  1/(1 + y)T   * (1 - c/y)

Use in excel Rate function or Internal rate of return function (irr)