About this Bond Calculator
Bonds are debt securities. When you buy a bond, you are lending money to an entity (government or corporation) for a fixed period at a fixed interest rate (coupon). This calculator helps you understand the true return (Yield) based on the price you pay.
How to use this calculator
- Enter the Face Value (Par Value, usually $1,000).
- Enter the Current Price you can buy it for.
- Enter the Coupon Rate (annual interest).
- Enter Years to Maturity.
Accuracy and testing
Review formula sources, default test cases, assumptions, unit handling, rounding rules, and changelog for this calculator.
How this calculator works
Inputs explained
Face Value
The amount the bond will be worth at maturity (Par Value). Typically $1,000.
Current Price
The market price of the bond. If Price < Face Value, it is a 'Discount' bond. If Price > Face Value, it is a 'Premium' bond.
Coupon Rate
The annual interest rate paid by the bond issuer relative to the Face Value.
Understanding your results
Example scenarios
Discount Bond
Face $1000, Coupon 5%, Price $900, 5 Years. You get $50/yr + $100 gain at maturity. YTM is ~7.4%.
Premium Bond
Face $1000, Coupon 5%, Price $1100, 5 Years. You pay extra upfront, lowering your effective return. YTM is ~2.8%.
Key Features
- YTM Approximation
- Current Yield
- Discount/Premium Logic
Things to Keep in Mind
Uses an approximation formula for YTM which is accurate enough for most retail investors but slightly less precise than iteration for very long terms.
Tips & Best Practices
- YTM assumes you reinvest all coupon payments at the same rate.
- Bond prices move inversely to interest rates. When rates go up, bond prices go down.
Glossary of Terms
- Par Value
- The face value of the bond.
- Coupon
- The annual interest payment.
- Maturity
- The date when the principal amount is repaid.