Bond Yield to Maturity Calculator
The example values shown are for a 10 year bond with a face value of 1000 and a current market price of 950. The interest rate is 7% and there are 2 payments per year so that each payment is 35. The bond was issued one year ago so there are 18 payments to go before the bond matures. If you are not sure what these terms mean, they are defined below.
- Market Price
- This is the current quoted price for buying the bond. It should not include accrued interest (this is known as the clean price). In the U.S., bonds are most often quoted in these terms. If the price includes accrued interest, you should subtract it before calculating the yield. Accrued interest is simply the prorated coupon payment. For example if the bond is halfway between coupon payments then the accrued interest is half the coupon payment. To calculate accrued interest divide the number of days since the last coupon payment by the total number of days between payments and multiply this by the size of the payment.
- Face Value
- This is the nominal value of debt that the bond represents. It is the amount that is payed to the holder of the bond on the date that it matures, also called the redemption date. When a bond is initially sold, the interest rate is usually set so that the market price is close to the face value.
- Interest Rate
- This determines the value of the annual coupon payments as a percentage of the face value. For example if the face value is 1000 and the interest rate is 7% then there will be total coupon payments of 70 in a year. If there are 2 payments per year then each will payment will equal 35.
- Number of payments per year
- A bonds coupon payment is usually split up into a number of payments per year. The most common number is 2.
- Number of payments till maturity
- This is the number of payments that will be made by the bond before it matures. For a 10 year bond that is 2 years old and has 2 payments per year, there will be 16 payments left till it matures.