Understanding the bond calculator
A bond's price is the present value of everything it will pay: a stream of coupon payments plus the face value returned at maturity, each discounted at the market yield investors currently demand. When the market yield rises above the coupon rate, the bond must sell at a discount to compete; when yields fall below the coupon, it trades at a premium. This inverse relationship between yields and prices is the central fact of bond investing.
Current yield annual coupon divided by price is a quick income gauge but ignores the gain or loss you'll realize as the price pulls back to par by maturity. Yield to maturity, which this pricing embodies, is the more complete measure. Longer maturities and lower coupons make a bond's price more sensitive to yield changes, a risk known as duration.
Results are estimates for education only and are not financial advice.