Bond Price Calculator
A bond pays a fixed interest amount, called the coupon, and then returns its face value at maturity. Its price moves against market yield: when yields rise, the price of an existing bond falls.
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How it works
Each coupon payment and the final face value are discounted back to today at the yield, then added up. This calculator assumes two payments a year, so the coupon and the yield are each halved for each payment and the number of payments is doubled.
When the yield equals the coupon rate, the price equals face value. A higher yield gives a lower price, and a lower yield gives a higher price.
Worked example
A bond with a face value of $1,000.00, a 5% coupon and 10 years to maturity, priced to yield 4.5%, sells for $1,039.91. The difference from face value is $39.91.
Questions
Why does the price fall when yield rises?
The coupon is fixed, so a buyer only pays a lower price if the yield is higher. The price adjusts until the two match.
Does this include accrued interest?
No. A bond bought between coupon dates also owes the seller the interest earned since the last payment, which this does not add.
Are the payments always twice a year?
This calculator assumes semiannual payments, which is common. Other schedules, such as annual payments, give a slightly different price.
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