Bond Price Calculator
Determine the market price of a bond by entering its face value, coupon rate, maturity, and the current market yield. This tool helps investors understand what a bond is worth today.
Your Bond Valuation
Enter your bond details above and click "Calculate".
Understanding Your Bond Valuation
A bond's price fluctuates based on the wider interest rate environment. This calculator determines a bond's fair market value—its present value—by discounting its future cash flows (both the regular coupon payments and the final face value) back to today using the current market rate.
Key Terms in Bond Calculation
- Face Value (Par Value): This is the amount the bond issuer promises to pay back to the bondholder on the maturity date. A standard face value for corporate bonds is often $1,000.
- Annual Coupon Rate: The fixed interest rate the bond pays annually, expressed as a percentage of the face value. This rate does not change throughout the bond's life.
- Years to Maturity: The remaining time until the bond's face value is repaid.
- Market Rate (Yield to Maturity - YTM): This is the crucial variable. It's the current interest rate for new, similar bonds in the market. If the market rate is higher than your bond's coupon rate, your bond's current price will be lower than its face value, and vice-versa.
Why a Bond's Price is Not Its Face Value
The price calculated by this tool is the bond's present value. This value changes based on the relationship between the bond's fixed coupon rate and the prevailing market rate.
- Trading at a Discount: If the market rate is higher than the bond's coupon rate, the bond is less attractive. Its price will fall below its face value to offer a competitive yield.
- Trading at a Premium: If the market rate is lower than the bond's coupon rate, the bond is more attractive. Investors are willing to pay more than the face value for its higher-than-average interest payments.
- Trading at Par: If the market rate is equal to the bond's coupon rate, the bond's price will be equal to its face value.
What is Current Yield?
Current yield is a simple measure of a bond's return. It's calculated by dividing the annual coupon payment by the bond's current market price. While useful for a quick snapshot, it doesn't account for the capital gain or loss you'll realize when the bond matures if you bought it at a discount or premium. For a more comprehensive measure, investors often look at Yield to Maturity (YTM), which is the "Market Rate" you input into the calculator.