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Bond Calculator
Calculate bond price, yield, and cash flow schedule from coupon rate and market yield.
Bond Pricing
Fair price from discounted cash flow analysis
Yield Analysis
Current yield and premium or discount to par
Cash Flow Schedule
Period-by-period coupon payments and cumulative totals
Calculate Bond Price
Enter the bond details to calculate its fair price and yield metrics.
How Bond Pricing Works
The Present Value Approach
Price = Σ[C / (1 + r)^t] + FV / (1 + r)^n
C = coupon per period
r = market yield per period
n = total number of periods
A bond's fair price is the sum of all future cash flows discounted back to today. Each coupon payment and the final face value repayment are divided by (1 + yield)^t to find their present value.
Worked Example
A 10-year bond with a £1,000 face value and 5% annual coupon pays £50 per year. If the market yield is 4%, each coupon and the face value are discounted at 4%. The result is a price of approximately £1,081 — an 8.1% premium to par — because the coupon rate exceeds the market yield.
Understanding Bond Yield and Price
Premium vs Discount Bonds
When a bond's coupon rate is higher than the market yield, it trades at a premium (above face value). When the coupon rate is lower than the market yield, it trades at a discount (below face value). At maturity, the price converges to face value regardless of the premium or discount.
Current Yield vs Yield to Maturity
Current yield is the annual coupon divided by the bond's current price — a simple income measure. Yield to maturity (YTM) is more comprehensive: it includes the effect of buying at a premium or discount. A bond bought at a discount has a YTM higher than its current yield because you also gain from the price rising to par.
How to Use This Bond Calculator
Enter Bond Details
Face value, coupon rate, and years to maturity.
Set Market Yield
The prevailing yield or your required rate of return.
Review Results
See bond price, yield, premium/discount, and cash flows.
Types of Bonds for Investors
- Government Bonds (Gilts). Issued by the UK government, gilts are considered very low risk. They offer lower yields but are backed by the full faith of the government. Ideal for capital preservation and steady income.
- Corporate Bonds. Issued by companies to raise capital. They offer higher yields than gilts to compensate for credit risk. Investment-grade bonds (rated BBB or above) balance yield and safety.
- Index-Linked Bonds. The coupon and face value adjust with inflation (typically RPI or CPI). They protect purchasing power but may offer lower nominal yields when inflation expectations are low.
- High-Yield Bonds. Rated below investment grade (BB or lower), these bonds offer higher returns but come with significantly greater default risk. Often used to diversify income portfolios.
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