>Hi,
>
>I am trying to understand the Yield to Maturity of a bond. Conceptually I understand it. But I cannot figure out how the following example works (I found this example on a reputable - as far as I know - site).
>
>The purchase price of a bond is $900. Maturity 5 years. Face amount $1000 (I think it is also called par). Coupon is 2%.
>
>So the bond earns (by years)
>

>Yr 1     Yr 2    Yr 3     Yr 4       Yr 5
>$20      $20     $20     $20        $1020  (coupon + principle)  
>

>then they say that the Yield to Maturity of this bond is 4.27%.
>
>How do they calculate the 4.27%?

I don't think it answers your question directly, but this link gives the basics. With that you should be able to Google the answers you need:

http://www.investopedia.com/university/advancedbond/advancedbond2.asp