Bond Calculator

Bond Price

$925.61

The Numbers

  • Coupon payment per period: $25.00
  • Total payment periods: 20
  • Trading at a discount (below face value)

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Disclaimer

This calculator provides estimates for informational purposes only and does not constitute financial, medical, legal, or tax advice. Always consult a qualified professional about your specific situation.

How This Calculator Works

A bond’s fair price is the present value of everything it will pay you: every coupon payment along the way, plus the face value repaid at maturity, all discounted at the current market yield. Enter the bond’s face value, coupon rate, the market yield, and years to maturity, and this calculator finds its price.

A bond’s price moves opposite to market yields. When yields rise above the bond’s own coupon rate, the bond becomes less attractive than newly-issued bonds paying the higher rate, so it trades at a discount (below face value). When yields fall below the coupon rate, the bond trades at a premium (above face value). When they’re equal, the bond trades at exactly its face value — at par.

The Formula

Price=Present value of every coupon payment+Present value of the face value at maturity\text{Price} = \vA{\text{Present value of every coupon payment}} + \vB{\text{Present value of the face value at maturity}}

Each coupon payment and the final face value are discounted back to today using the market yield, the same present-value logic behind the Present Value Calculator.

Worked Example

A $1,000 face value bond with a 5% annual coupon (paid semiannually), 10 years to maturity, and a current market yield of 6%:

  1. Each semiannual coupon payment: $1,000 × 5% ÷ 2 = $25, paid over 20 periods.
  2. Present value of all 20 coupon payments, discounted at 3% per period: ≈ $371.94.
  3. Present value of the $1,000 face value, discounted 20 periods: ≈ $553.68.
  4. Bond price: $371.94 + $553.68 ≈ $925.61 — trading at a discount, since the 6% market yield exceeds the bond’s own 5% coupon rate.

Source: The standard bond pricing (present value of cash flows) formula.

Frequently Asked Questions

Why does a bond's price move opposite to interest rates?

A bond's coupon rate is fixed when it's issued. If market yields rise above that fixed rate, new bonds pay more, making the older bond less attractive unless its price drops to compensate — so it trades at a discount. If market yields fall below the coupon rate, the older bond's fixed payments look more attractive, so it trades at a premium.

What is a coupon payment?

The periodic interest payment a bond pays its holder, calculated as the face value times the coupon rate, divided by how many times per year it pays (semiannually is the standard for U.S. Treasury and most corporate bonds). It's called a "coupon" from the historical practice of physically clipping a paper coupon off a bond certificate to redeem each payment.

What happens at maturity?

At maturity, the bond issuer repays the full face value (also called par value) to the bondholder, in addition to the final coupon payment. This calculator's price already accounts for that final repayment, discounted back to today.