Bond Yield Calculator
Calculate current yield, yield to maturity, and yield to call for fixed income investments. Enter values for instant results with step-by-step formulas.
Reviewed for accuracy by Sahil, Senior Finance & Tax Editor
Bond Yield Calculator
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Formula: Current Yield = Annual Coupon / Price | YTM ≈ [C + (F-P)/n] / [(F+P)/2]
Worked example — YTM ≈ 5.64%
Formula
Current Yield = Annual Coupon / Price | YTM ≈ [C + (F-P)/n] / [(F+P)/2]
Current yield is annual income / price. Yield to Maturity (YTM) accounts for the gain/loss if held to maturity. The approximation formula gives a close estimate.
Worked Examples
Example 1: Corporate bond
Problem:$1000 face, 5% coupon, price $950, 10 years
Solution:CY = 50/950 = 5.26%. YTM ≈ (50+5)/975 = 5.64%
Result:YTM ≈ 5.64%
Frequently Asked Questions
Why does bond price move opposite to yield?
When interest rates rise, existing bonds with lower coupons become less attractive, so their price drops to bring the yield up to market rates.
What is the difference between current yield and yield to maturity?
Current yield is simply the annual coupon payment divided by the current market price, expressed as a percentage. It only measures income return and ignores the capital gain or loss you receive when the bond matures at face value. Yield to maturity (YTM) is a more complete measure that accounts for both the coupon income and the price difference between what you paid and what you will receive at maturity, assuming you hold the bond until it matures and reinvest coupons at the same rate.
What does it mean when a bond trades at a premium or discount?
A bond trades at a premium when its market price is above its face value, which happens when the coupon rate is higher than current market interest rates. Investors are willing to pay more because the bond pays more income than newly issued bonds. A bond trades at a discount when its price is below face value because its coupon rate is lower than prevailing rates, making it less desirable. At maturity, the bondholder always receives the face value regardless of what they paid, creating a capital loss (premium) or capital gain (discount).
What risks should I consider when investing in bonds?
Key bond risks include interest rate risk (prices fall when rates rise, and longer-duration bonds are more sensitive), credit or default risk (the issuer may fail to make payments, rated by agencies like Moody's and S&P), inflation risk (fixed coupon payments lose purchasing power if inflation rises), liquidity risk (some bonds are hard to sell quickly without a large price concession), and call risk (the issuer may redeem the bond early when rates fall, forcing reinvestment at lower rates). US Treasury bonds eliminate credit risk but are still subject to interest rate and inflation risk.
What is APY vs APR in crypto yield?
APR is the simple annual rate without compounding. APY includes the effect of compounding. A 10% APR compounded daily equals roughly 10.52% APY. Always compare APY to APY for accurate yield comparisons.
Reviewed for accuracy by Sahil, Senior Finance & Tax Editor · Editorial policy
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