Bond Valuation โ Price, Yield & Cash Flows
Calculate bond present value based on face value, coupon rate, and market interest rate.
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Premium when coupon > market rate Discount when coupon < market YTM = total return to maturity Prices fall when rates rise
Ready to run the numbers?
Why: Bond prices move inversely to interest rates. Understanding valuation helps with buying decisions.
How: PV of coupons + PV of face value. Coupon = face ร rate / n. Discount at market rate.
Run the calculator when you are ready.
Sample Scenarios
Bond Details
Valuation Details
Bond Details
Valuation
Income
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For educational purposes only โ not financial advice. Consult a qualified advisor before making decisions.
๐ก Money Facts
Face value
โ Standard
Above par
โ Coupon>Rate
Below par
โ Coupon<Rate
Total return
โ Yield
๐ Key Takeaways
- โข Premium: Price > face when coupon > market rate
- โข Discount: Price < face when coupon < market rate
- โข Par: Price = face when coupon = market rate
- โข Bond prices and interest rates move inversely
- โข Longer duration = more interest rate sensitivity
๐ก Did You Know?
๐ How Bond Pricing Works
Bond price = present value of future coupon payments + present value of face value at maturity. The discount rate is the market yield (YTM). When market rates rise, bond prices fall; when rates fall, bond prices rise.
๐ฏ Expert Tips
Compare YTM, Not Just Price
YTM accounts for coupons, price, and time to maturity.
Consider Callable Bonds
Callable bonds can be redeemed earlyโfactor in call risk.
Duration for Rate Risk
Higher duration = more price volatility when rates change.
Credit Quality Matters
Lower-rated bonds offer higher yields but higher default risk.
โ๏ธ Price vs Rate Relationship
| Coupon vs Market | Price | Example |
|---|---|---|
| Coupon > Market | Premium | 5% bond when market is 4% |
| Coupon = Market | Par | 5% bond when market is 5% |
| Coupon < Market | Discount | 4% bond when market is 5% |
โ Frequently Asked Questions
What is yield to maturity (YTM)?
YTM is the total return if you hold the bond to maturity, including coupons and price change. It's the discount rate that makes PV of cash flows equal to price.
Why do bond prices fall when rates rise?
New bonds offer higher coupons. Existing bonds must drop in price to competeโtheir fixed coupons become less attractive.
What is duration?
Duration measures price sensitivity to rate changes. A 7-year duration means ~7% price change per 1% rate move.
Should I buy premium or discount bonds?
Both can be fine. Premium bonds have higher coupons; discount bonds have more price appreciation potential. Compare YTM.
๐ Bond Metrics by the Numbers
โ ๏ธ Disclaimer: This calculator provides estimates. Actual bond prices may differ. Consult a financial advisor for investment decisions.
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