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Difference Between APY & YTM

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Question: 
What is the difference between APY and YTM?
Answer: 

The APY (annual percentage yield) is an expression of the earnings on an interest-bearing deposit in a year, expressed as a percentage, taking into account the effect of compounding.

The YTM (yield to maturity) is a measure of a bond's anticipated return, taking into acocunt the coupon rate and the current interest rate in relation to the price, the purchase or discount price in relation to the par value, and the years remaining until the bond matures.

More simply, an APY is to interest-bearing deposit accounts as a YTM is to bond investments.

First published on BankersOnline.com 9/17/12

First published on 09/17/2012

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