Bond Calculator
Calculate a bond's yield to maturity (YTM) from its market price, its fair price from a required yield, current yield and coupon income.
Bond Cash Flow Output
Price and yield move in opposite directions
A bond pays a fixed coupon on its face value and returns that face value at maturity. Because the coupon is fixed, the only way the market can reprice a bond is through its price — and that is whybond prices fall when interest rates rise. A bond paying 3% is worth less once new issues pay 5%, and its price drops until the effective yield matches.
That gives three different "yields" that are easy to confuse. The coupon rate is fixed against face value and never changes. The current yield is the coupon divided by today's price. The yield to maturity is the full internal rate of return if you hold to maturity, folding in every coupon plus the gain or loss between price and face value — it is the only one of the three that lets you compare bonds properly.
Duration measures how much price moves for a given rate change, and it rises with maturity. A 30-year bond can lose a fifth of its value on a modest rate rise while a two-year bond barely moves. This is why long bonds are not the safe asset they are often assumed to be: hold to maturity and you get your face value back, but sell early in a rising-rate market and the loss is real.
Frequently asked questions
What is coupon rate on a bond?
The coupon rate is the annual interest rate paid by the bond issuer on the bond's face value.
Why do bond prices fall when interest rates rise?
A bond's coupon is fixed. When new bonds are issued at higher rates, the older, lower-coupon bond is only attractive at a discount - the price falls until its yield matches the market. The relationship is mechanical and inverse, and it is why bond funds lose value in a rising-rate environment.
What is yield to maturity?
The single discount rate that makes the present value of all future coupons and the principal repayment equal to the current price. It is the total return if you hold to maturity and reinvest coupons at that same rate - an assumption that rarely holds exactly, which is why realised return usually differs from YTM.
What is duration and why does it matter?
Duration measures price sensitivity to interest rates: a bond with a duration of 7 falls roughly 7% if rates rise one percentage point. Longer maturities and lower coupons mean higher duration and more volatility. It is the single most useful number for understanding the interest-rate risk you are carrying.