Bond Calculator
Calculate a bond's annual coupon payment, current yield, yield to maturity (YTM), and Macaulay duration from its face value, coupon rate, market price, and maturity.
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How to use this calculator
P = market price, C = annual coupon, F = face value, n = years to maturity, y = YTM (solved iteratively). Current yield = coupon/price.
- 1
Enter the bond's face (par) value — typically $1,000 for corporate bonds.
- 2
Enter the coupon rate (the annual interest rate printed on the bond).
- 3
Enter the current market price — below face value = discount bond; above = premium bond.
- 4
Enter years remaining until the bond matures to get YTM, current yield, and duration.
Frequently asked questions
What is the difference between current yield and YTM?
Current yield = annual coupon ÷ current price. YTM accounts for the coupon payments AND the capital gain or loss from holding the bond to maturity (when you receive face value regardless of what you paid). YTM is the more complete measure of a bond's return.
Why does bond price fall when interest rates rise?
A bond's coupons are fixed. When new bonds offer higher rates, existing bonds paying lower coupons become less attractive. Their price falls until their YTM matches the prevailing market rate. This inverse relationship is fundamental: rising rates → falling bond prices.
What does duration tell me?
Macaulay duration is the weighted average time to receive a bond's cash flows, expressed in years. Modified duration estimates price sensitivity: a modified duration of 7 means a 1% rise in yields causes approximately a 7% drop in bond price. Longer duration = more interest rate risk.
What is a premium vs discount bond?
A premium bond trades above face value (market price > par) — this happens when its coupon rate exceeds current market rates. A discount bond trades below par — its coupon is below current rates. At maturity, all bonds pay face value, so discount bonds deliver a capital gain and premium bonds a capital loss.
Bond valuation and yield explained
The price-yield relationship
Bond prices and yields move in opposite directions. When market interest rates rise, existing bonds with lower coupons become less attractive, and their prices fall until the YTM equals the new market rate. Conversely, when rates fall, existing bonds rise in price. This mechanism keeps all bonds in the market priced fairly relative to each other.
Using duration to measure risk
Macaulay duration measures how long, in years, it takes to recoup a bond's price via cash flows. Modified duration converts this to a price sensitivity: multiply modified duration by the rate change to estimate the price change. A portfolio of bonds with average modified duration 5 will lose approximately 5% in value if rates rise by 1 percentage point.
Types of bonds and their yield conventions
Government bonds (Treasuries, Gilts, G-Secs): lowest yields, highest safety. Investment-grade corporate bonds: slightly higher yields for slightly more credit risk. High-yield (junk) bonds: significantly higher yields for significant default risk. Municipal bonds (US): often tax-exempt, compare on after-tax yield. Zero-coupon bonds: no coupons, priced at deep discount to face value.
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Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →