About the Bond Calculator
A bond calculator computes a bond's price from its yield to maturity, along with its current yield. Bond pricing is the clearest illustration of the inverse relationship between interest rates and asset values.
The formula
Price = Σ [C / (1 + y)ᵗ] + F / (1 + y)ⁿC is the annual coupon payment, F the face value, y the yield to maturity, and n the years remaining. The price is the present value of all future cash flows.
How to use this calculator
- 1Enter your Face Value ($). The field starts at
1000, which you can overwrite. - 2Enter your Annual Coupon Rate (%). The field starts at
5, which you can overwrite. - 3Enter your Yield to Maturity (%). The field starts at
6, which you can overwrite. - 4Enter your Years to Maturity. The field starts at
10, which you can overwrite. - 5Read the result straight away — it recalculates as you type, so there is no button to press. Use Share to copy a link that reopens the page with your exact numbers filled in.
Worked example
| Input | Value |
|---|---|
| Face Value ($) | 1000 |
| Annual Coupon Rate (%) | 5 |
| Yield to Maturity (%) | 6 |
| Years to Maturity | 10 |
Result
Bond Price: $926.40
Current Yield: 5.397%
Annual Coupon: $50.00
Discount: $73.60
Those are the values the page loads with, so you can reproduce this result yourself and then change one field at a time to see what drives the outcome.
Understanding your result
Price and yield move in opposite directions by necessity. A bond paying a 5 percent coupon when market yields are 6 percent must sell below face value, because a buyer will only accept the lower coupon at a discount that brings the total return up to 6 percent. When market yields fall below the coupon, the bond trades at a premium.
Duration measures how sharply price responds to yield changes, and it rises with maturity. A 30-year bond can lose 20 percent or more of its value on a two-point yield rise, while a 2-year bond barely moves. This is why long-dated bonds are far from the risk-free investment they are sometimes assumed to be.
Things worth knowing
- Yield to maturity assumes you hold to maturity and reinvest coupons at the same yield.
- Current yield is just coupon divided by price and ignores capital gain or loss at maturity.
- Longer maturity means greater price sensitivity to rate changes — higher duration risk.
- Credit risk is separate from rate risk. A high yield may reflect default probability rather than opportunity.
- Callable bonds can be redeemed early by the issuer, which caps upside when rates fall.
Frequently asked questions
Why do bond prices fall when interest rates rise?+
Because a bond's coupon is fixed. When new bonds offer higher yields, existing lower-coupon bonds must fall in price until their total return matches the market, which is what makes them competitive.
What is yield to maturity?+
The total annualised return if you buy at the current price and hold to maturity, including coupons and any gain or loss against face value. It assumes coupons are reinvested at the same yield.
What is the difference between current yield and YTM?+
Current yield is the annual coupon divided by the price, ignoring maturity. YTM includes the capital gain or loss you realise at redemption, making it the more complete measure.
Are bonds safe?+
Government bonds carry minimal default risk but real interest rate risk — long-dated bonds can lose substantial value when rates rise. Corporate bonds add credit risk on top of that.