Yield to maturity is an investor’s overall return for owning a bond, if the bond is held until maturity.
Applying "Yield to Maturity" to Securities Exams:
The yield to maturity takes in to consideration the price the investor paid to purchase the bond and assumes that the coupon payments are reinvested at the same rate as the rate the investor is receiving from the bond. The yield to maturity will be the highest yield for a non callable bond purchased at a discount and the lowest yield for a non callable bond purchased at a premium. An investor who purchases a bond at $900 will receive $1,000 at maturity this additional $100 increases the investor’s yield to maturity. Conversely if the investor purchased the bond at a $1,100 the investor will still only receive $1,000 at maturity $100 less than the price paid. This will reduce the investor’s yield to maturity