Isn't YTM misleading

[sharky]

Hi. I'm new to investing and very new to these forums. I've been studying bonds on my own for a couple of weeks now, and I'm not been able to answer the following question.

Yield to maturity (YTM) is the yield you will earn on a bond if you hold it to maturity (given the current price and market interest rate at the time of purchase). Everyone uses this as metric to compare bonds across the board because it is a function of all the different variables needed for a bond valuation. However it can be misleading. YTM assumes that each periodic coupon payment is reinvested at the coupon rate. Unfortunately, that is unrealistic because at the time the coupon is paid market interest rates may have changed (most likely) thus changing the rate which you can reinvest at (hopefully for the better).

So here is my question. How do you compute the total yield on a bond investment which is held to maturity and assuming coupon payments are not reinvested at all? This is a reasonable question because many older investors will invest in bonds and use the coupon payments as supplemental income at retirement.

My initial guess at the answer is add all the coupon payments you will receive from the date of purchase to the date of maturity and the face value of the bond which is paid at maturity. This sum is then divided by the principle you paid to buy the bond. The quotient I believe is the rate of return on this bond. Can anyone confirm this is true? If it is not correct can you provide a way to calculate the yield on a bond without reinvesting coupon payments?

Thanks.