Bond Calculator

Calculate bond yields including yield to maturity (YTM) and current yield. Analyze bond investments and compare returns.

A bond pays a fixed Coupon Rate on its Face Value on a regular schedule, but once it starts trading, its Current Market Price moves with interest rates -- so the return an investor actually earns depends on what they paid, not just the stated coupon. Current Yield is the simplest measure: Annual Coupon Payment divided by Current Market Price, ignoring any gain or loss at maturity. Yield to Maturity (YTM) is more complete -- it's the single discount rate that makes the present value of every remaining coupon payment plus the face-value repayment at maturity exactly equal Current Market Price, solved here by bisection, which is unconditionally convergent for a bond's price curve. Because a bond trading below face value (a discount bond) also returns the difference between what you paid and the face value you'll receive back at maturity, YTM is always higher than Current Yield for a discount bond, and lower for a premium bond trading above face value. Paying a lower Current Market Price for the same coupon and face value raises both Current Yield and YTM, since you're getting the same fixed payments for less money up front. Payment Frequency (how often the coupon is paid -- annually, semi-annually, quarterly, or monthly) changes the size of each individual coupon payment and the compounding schedule used in the YTM calculation, but it does not change Annual Coupon Payment itself, since that total is fixed by Face Value and Coupon Rate regardless of how many installments it's split into. Because a bond pays a whole number of coupons, Years to Maturity is rounded to the nearest whole coupon period before pricing -- at Annual payments a 1.5-year entry is priced as a 2-year bond, and at the default Semi-Annual frequency every 0.5-year step is already exact. Two other return figures appear alongside YTM and they answer different questions. Total Return simply adds up every coupon you'll receive plus the Capital Gain/Loss at maturity, and Annualized Return spreads that total geometrically over the holding period. The gap between Annualized Return and YTM is the reinvestment assumption: YTM assumes every coupon is reinvested at YTM until maturity, while Annualized Return assumes coupons sit in cash and earn nothing. At the defaults that's 5.662% against 4.67% -- the truth for any real investor sits between the two, depending on what they actually do with the coupons. One simplification to know about: this calculator prices the bond as if you were buying it on a coupon payment date, so it charges no accrued interest and applies no day-count convention. A real purchase between coupon dates settles at the quoted (clean) price plus accrued interest, and a broker's quoted yield is computed against that dirty price on an actual/actual or 30/360 basis -- expect a few basis points of difference from the figure here.