Bond Yield Calculator
Find the Yield to Maturity (YTM) or fair price of a bond based on its face value, coupon rate, current price, and time to maturity.
Frequently Asked Questions
What is Yield to Maturity (YTM) on a bond?
YTM is the total annualised return you earn if you buy a bond today and hold it until it matures — assuming all coupon payments are reinvested at the same rate. It is the most complete measure of a bond's return, accounting for the purchase price, all coupon payments, and the face value repayment.
What is the difference between coupon rate, current yield, and YTM?
Coupon rate = annual coupon ÷ face value (fixed). Current yield = annual coupon ÷ current market price. YTM is the most comprehensive — it includes the capital gain or loss from buying at a discount or premium plus all coupons, discounted to present value. If a bond trades at par, all three are equal.
Why do bond prices fall when interest rates rise?
Existing bonds pay fixed coupons. When new bonds are issued at higher rates, existing bonds become less attractive — investors only buy them at a discount to make their effective yield competitive. This inverse relationship between bond prices and interest rates is one of the most fundamental concepts in fixed income.
What is the difference between a discount bond and a premium bond?
A discount bond trades below face value (e.g., $950 for a $1,000 bond) because its coupon rate is below current market rates. A premium bond trades above face value because its coupon rate exceeds market rates. Both converge to face value at maturity — the price difference is a built-in capital gain or loss.
What is duration and why does it matter for bonds?
Duration measures a bond's price sensitivity to interest rate changes. A bond with duration of 5 years falls approximately 5% in price if interest rates rise by 1%. Longer-duration bonds (more years to maturity, lower coupons) are more sensitive to rate changes. Duration is the key risk metric for bond investors.