Estimated bond price and supporting figures
Periodic yield is the nominal annual required yield divided by coupon frequency. Coupon payment is face value times annual coupon rate divided by frequency. Years times frequency must give a whole number of remaining payments.
To compare compounding growth under an assumed nominal rate, use the Compound Interest Calculator rather than treating a coupon payment as guaranteed reinvestment.
The formula
Periodic yield is the nominal annual required yield divided by coupon frequency. Coupon payment is face value times annual coupon rate divided by frequency. Years times frequency must give a whole number of remaining payments.
Worked bond price example
A 1,000 face-value bond with a 4% annual coupon, semiannual payments, 15 years remaining, and 5% nominal annual required yield has an estimated price of 895.35.
How to use this calculator
- Enter face value, annual coupon rate, required annual yield, years to maturity.
- Set coupon payments per year using the stated units or choices.
- Calculate and compare estimated bond price, coupon payment, price as a percentage of par, premium or discount to face value.
Choosing inputs for bond price
The coupon rate determines the promised periodic cash payment; the required yield determines the discount rate used to value it. These inputs answer different questions. A coupon below the required yield produces a discount to face value, while a coupon above it produces a premium in this fixed-rate, full-payment model.
This calculation values the bond on a coupon date, immediately after any coupon due at that date is paid. It therefore assumes the next coupon is one full period away. A settlement date between coupons requires accrued-interest and fractional-period conventions that this tool does not infer from a year count.
Interpreting estimated bond price
Price as a percentage of par allows a 1,000 bond and a 10,000 bond to be compared on the same quotation scale. Premium or discount is signed: a negative amount indicates a price below face value. The estimate excludes a call option and assumes each promised payment is made, so it should not be treated as a live market quote.
Assumptions & limitations
What this calculation assumes
- Coupons are fixed and the face value is repaid at maturity.
- Yield is nominal with compounding at the selected coupon frequency.
What to keep in mind
- Accrued interest, call features, default risk, fees, and between-coupon settlement conventions are excluded.
Common questions
Can I value a zero-coupon bond?
Yes. Set the coupon rate to zero; the price is the discounted face value.
Why is a bond priced at par?
With matching coupon rate and required yield, the present value equals face value in this model.
Does the price include accrued coupon interest?
No. This estimate is on a coupon date. Between-coupon settlement requires accrued interest and fractional-period conventions.
Sources & further reading
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