Bond Calculator

This calculator prices a bond by computing the present value of all future cash flows (coupon payments plus the face value at maturity) at the current market yield.

• Face Value: the amount the bond pays at maturity. Most U.S. corporate and government bonds have a face value of $1,000.
• Annual Coupon Rate: the interest rate stated on the bond. A 5% coupon on a $1,000 bond pays $50/year ($25 every 6 months if semi-annual).
• Coupon Frequency: most U.S. bonds pay semi-annually (twice per year). Some pay annually or quarterly. This affects both the payment amount and the discount rate used in pricing.
• Years to Maturity: how long until the bond matures and the face value is returned. Longer maturities mean greater interest rate sensitivity.
• Market Rate (YTM): the current yield available on comparable bonds in the market. When market rates rise above the coupon rate, the bond price falls below par. When market rates fall, the bond price rises above par.

A bond's fair value is the sum of the present value of all future coupon payments plus the present value of the face value returned at maturity:

Bond Price = C × [1 - (1 + r)^(-n)] / r + F / (1 + r)^n

• C = coupon payment per period (Face Value × coupon rate / frequency)
• r = market rate per period (YTM / frequency)
• n = total number of payment periods (years × frequency)
• F = face value

Example: $1,000 face, 5% coupon (semi-annual), 10 years, 6% YTM. Coupon = $25. r = 3%. n = 20. PV of coupons = $25 × (1 - 1.03^(-20)) / 0.03 = $372.05. PV of face = $1,000 / 1.03^20 = $553.68. Bond Price = $925.73 (trading at a discount because market rate exceeds coupon).

Current Yield vs YTM: current yield = annual coupon / price. YTM also accounts for the gain or loss as the price converges to par at maturity. YTM is the more complete measure of return.