Bond Calculator

A bond's price equals the present value of all future cash flows: the sum of discounted coupon payments plus the discounted face value. When market rates are below the coupon rate, the bond trades at a premium (above face value). When market rates are above the coupon rate, it trades at a discount.

Bond prices and interest rates move inversely. When rates rise, existing bonds with lower coupon rates become less attractive, so their prices fall. A 1% rate increase can drop a 10-year bond's price by about 7%–8%. Longer-maturity bonds are more sensitive to rate changes.

The coupon rate is the fixed annual interest rate stated on the bond (e.g., 5% of $1,000 = $50/year). YTM is the total return you earn if you buy the bond at its current price and hold it to maturity. If you buy a bond at a discount, YTM is higher than the coupon rate.

Current yield = annual coupon payment / current bond price. If a bond pays $50/year and is priced at $1,081, its current yield is $50/$1,081 = 4.63%. Current yield ignores the capital gain or loss at maturity, so it is less comprehensive than YTM.