Bond Price Calculator

A bond is a fixed-income security where an investor lends money to an issuer (government or corporation) for a defined period. The issuer pays periodic interest (coupons) and returns the face value at maturity.

When market interest rates rise, existing bonds with lower coupon rates become less attractive, so their prices fall to compensate. When rates fall, existing bonds pay relatively more, so their prices rise.

Yield to maturity (YTM) is the total return anticipated if the bond is held until it matures. It accounts for coupon payments, the difference between purchase price and face value, and time value of money.

Current yield = annual coupon / bond price. YTM is more comprehensive — it also accounts for capital gain or loss if you hold to maturity. YTM is the better measure of a bond's true return.

A bond trades at a premium when its price exceeds face value (coupon rate > market rate). It trades at a discount when price is below face value (coupon rate < market rate). At maturity, it always returns face value.

Higher-rated bonds (AAA) have lower yields because they carry less default risk. Lower-rated or junk bonds must offer higher yields to attract investors. A credit rating downgrade causes bond prices to drop immediately.