Bond Calculator
Calculate the fair market price of any bond from its yield to maturity. See whether the bond trades at a premium or discount, current yield, total coupon income, and total return. The inverse relationship between bond prices and interest rates is shown clearly.
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How It Works
A bond's price equals the present value of all future coupon payments plus the face value at maturity, discounted at the yield to maturity. When market yields rise, bond prices fall because future cash flows are worth less today.
Price = Σ Coupon/(1+YTM/2)^t + Face/(1+YTM/2)^N5% coupon, 4% YTM, 10yr, $1,000 face = $1,081.11A bond trades at a premium when coupon rate exceeds YTM — investors pay more for above-market interest. It trades at a discount when coupon is below YTM. At maturity, all bonds return exactly face value.
Premium: Coupon > YTM → Price > Face; Discount: Coupon < YTM → Price < Face5% coupon at 4% YTM = $1,081 premium; at 6% YTM = $926 discountCurrent yield equals the annual coupon divided by the market price. Unlike YTM, it ignores the capital gain or loss from buying at a premium or discount. YTM is the complete return measure.
Current Yield = Annual Coupon / Current Price × 100$50 annual coupon / $926 price = 5.40% current yieldYTM is the discount rate that equates the present value of all bond cash flows to its current price. It accounts for coupon income and capital gain or loss from price to face value — the definitive bond return measure.
Solve: Price = Σ Coupon/(1+YTM/n)^t + Face/(1+YTM/n)^N$926 bond, 5% coupon, 10yr → YTM ≈ 6.0%Most US bonds pay coupons every 6 months. The coupon rate and YTM are divided by 2 for each semi-annual period. Total payments equal coupon rate × face value, split into two payments per year.
Semi-annual coupon = Face × Coupon Rate / 2$1,000 face, 5% coupon → $25 coupon every 6 monthsTotal return includes all coupon payments received plus the difference between face value and purchase price. A discount bond earns a capital gain at maturity; a premium bond realizes a capital loss.
Total Return = All Coupons + (Face Value - Purchase Price)$926 purchase, $50/yr × 10yr + $74 gain = $574 totalQuick Reference
Common examples — verify instantly above.
5% coupon, 4% YTM, 10yr
Bond price
$1,081.11 (premium)
5% coupon, 6% YTM, 10yr
Bond price
$925.61 (discount)
5% coupon, 5% YTM, 10yr
Bond price
$1,000.00 (at par)
$926 price, $50 coupon
Current yield
5.40%
$1,081 price, $50 coupon
Current yield
4.63%
$1,000 face, 5%, 10yr
Total coupons received
$500 total
Premium bond at maturity
$1,081 price to $1,000 face
-$81 capital loss
Discount bond at maturity
$926 price to $1,000 face
+$74 capital gain
Tips & Shortcuts
Always compare bonds using YTM, not coupon rate — YTM accounts for both income and any price premium or discount amortized to maturity.
When interest rates rise, existing bond prices fall. Longer-maturity bonds fall more for the same rate change — this is interest rate risk, managed through duration.
US Treasury bonds carry no default risk and are the global benchmark for safety. Corporate bonds pay higher yields to compensate for credit risk.
Callable bonds can be redeemed by the issuer before maturity. Always check yield to call (YTC) in addition to YTM for callable bonds.
TIPS (Treasury Inflation-Protected Securities) adjust principal for inflation — the best protection against inflation with zero credit risk.
Bond funds do not have a fixed maturity date — if rates rise, the fund NAV falls and stays lower. Individual bonds held to maturity always return face value regardless of intermediate prices.
Common Mistakes to Avoid
Using coupon rate to compare bonds instead of YTM
A 6% coupon bond at $1,100 may have lower YTM than a 5% coupon bond at $920. Compare YTM only for apples-to-apples return comparison.
Ignoring that bond prices move inversely to interest rates
When you buy a bond, rising rates cause the market price to fall. This interest rate risk is permanent while you hold the bond — only disappears at maturity when face value is returned.
Confusing current yield with yield to maturity
Current yield ignores capital gains or losses. A discount bond's YTM is higher than its current yield because the capital gain adds to total return. Use YTM for complete analysis.
Not checking credit rating before buying corporate bonds
Below-investment-grade (junk) bonds carry significant default risk. Always check Moody's, S&P, or Fitch rating. Stick to investment-grade (BBB or higher) for most of your bond portfolio.
Assuming bond funds work identically to individual bonds
Bond fund NAV falls when rates rise and does not necessarily recover to original levels. Individual bonds held to maturity always return face value — a crucial difference for capital preservation goals.
Buying long-duration bonds without understanding price sensitivity
A 30-year Treasury drops roughly 17% in price for every 1% rise in interest rates (high duration). Match bond maturity to your investment timeline to avoid being forced to sell at a loss.
Frequently Asked Questions
When market rates rise, newly issued bonds offer higher coupons. Existing bonds with lower coupons become less attractive, so their prices fall until their YTM matches the new market rate. The mathematical relationship is exact: bond price equals the present value of all future cash flows discounted at the current market yield.
YTM is the total annualized return you earn buying a bond at its current price and holding to maturity, assuming all coupons are reinvested at YTM. It accounts for coupon income plus any capital gain or loss from price to face value — making it the most comprehensive bond return metric.
A premium bond has a coupon rate above the current market yield, so investors pay more than face value to receive above-market interest payments. A discount bond has a coupon below the market yield, so it trades below face value. Both return exactly face value at maturity regardless of their purchase price.
Duration measures a bond's sensitivity to interest rate changes — the weighted average time to receive all cash flows. A duration of 7 means the bond's price changes by approximately 7% for every 1% rate change. Longer maturity and lower coupon bonds have higher duration and are more rate-sensitive.
US Treasury securities are backed by the full faith and credit of the US government with essentially zero default risk. TIPS also protect against inflation. Investment-grade corporate bonds (BBB or higher) carry minimal but non-zero default risk and pay higher yields to compensate.
Individual bonds held to maturity guarantee return of face value regardless of interest rate movements. Bond funds provide diversification and liquidity but have no maturity date — NAV falls when rates rise and may not fully recover. Individual bonds suit investors with specific cash flow needs and maturity horizons; funds suit those wanting broad diversification.
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