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Hi jrr7,

For me the yield to maturity is an internal rate of return calculation given the price of the bond, coupon payments and principal payment. For the discount bond I posted previously here are the cashflows. I used Excel's Solver to find a yield to make the sum equal the current bond price (94.17)
Yield to Maturity  Period  Payment  Discounted Payment
4.00% 1 3.5 3.37
BEY 2 3.5 3.24
8.00% 3 3.5 3.11
4 3.5 2.99
5 3.5 2.88
6 3.5 2.77
7 3.5 2.66
8 3.5 2.56
9 3.5 2.46
10 3.5 2.36
11 3.5 2.27
12 3.5 2.19
13 3.5 2.10
14 3.5 2.02
15 3.5 1.94
16 103.5 55.26
sum 94.17

Matthew

PS: The 4% is because there are two periods per year and the bond equivalent yield (BEY) is just the 6 month period times two.

PSS: The current yield on an annual basis would be $7/$94.17 which is 7.43%. The current yield is lower than the YTM because the current yield doesn't get the bonus of the bond appreciation to par at maturity. Or saying it another way, the YTM gets a $5.83 kicker ($100 - $94.17) over the 8 year period that the current yield doesn't.
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