Bond Price Calculator
Calculate a bond's price from its face value, coupon rate, market discount rate, and years to maturity using the standard discounted cash flow formula.
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Bond Price
$926.40
PV of Coupons
$368.00
PV of Face Value
$558.39
Premium / (Discount)
-$73.60
Coupon Schedule (Present Value)
| Year | Coupon Payment | Present Value |
|---|---|---|
| 1 | $50.00 | $47.17 |
| 2 | $50.00 | $44.50 |
| 3 | $50.00 | $41.98 |
| 4 | $50.00 | $39.60 |
| 5 | $50.00 | $37.36 |
| 6 | $50.00 | $35.25 |
| 7 | $50.00 | $33.25 |
| 8 | $50.00 | $31.37 |
| 9 | $50.00 | $29.59 |
| 10 | $50.00 | $27.92 |
How Bond Price Is Calculated
A bond's price is the present value of all the cash flows it pays: the periodic coupon payments plus the face value returned at maturity, each discounted back to today using the market (yield) rate. When the coupon rate matches the market rate, the bond prices at par — equal to its face value. When the market rate is higher than the coupon rate, the bond trades at a discount; when it's lower, the bond trades at a premium.
Where r = market discount rate, n = years to maturity
Example
A $1,000 face-value bond with a 5% annual coupon and 10 years to maturity, discounted at a 6% market rate, prices at roughly $926 — a discount to face value, because the market demands a higher yield than the bond's stated coupon offers. If the market rate instead fell to 4%, the same bond would price above $1,000, at a premium.
Common Use Cases
- Estimating what a bond is worth today given current market interest rates.
- Understanding why bond prices move inversely to interest rates.
- Comparing bonds with different coupon rates and maturities on a like-for-like basis.
- Evaluating whether a bond is trading at a premium, discount, or par.
FAQs
Why do bond prices fall when interest rates rise?
A bond's coupon payments are fixed once issued. When market rates rise, new bonds offer higher coupons, so existing bonds with lower fixed coupons become less attractive and must trade at a lower price to offer a competitive yield.
What does trading at a premium or discount mean?
A bond trades at a premium when its price is above face value (coupon rate higher than market rate) and at a discount when its price is below face value (coupon rate lower than market rate). At par, the coupon rate equals the market rate exactly.
Does this assume annual coupon payments?
Yes, this calculator assumes one coupon payment per year for simplicity. Many bonds pay semi-annually, which slightly changes the exact price but follows the same discounting principle applied to each smaller, more frequent payment.