Bond Calculator: Yield, Price & YTM

Rate Change	New Rate	Bond Price	Price Change
-2%	3.50%	$1,126	+$176 (+18.5%)
-1%	4.50%	$1,040	+$90 (+9.5%)
0%	5.50%	$962	+$12 (+1.3%)
+1%	6.50%	$891	$-59 (-6.2%)
+2%	7.50%	$826	$-124 (-13.0%)

Rate Change

New Rate

Bond Price

Price Change

-2%

3.50%

$1,126

+$176 (+18.5%)

-1%

4.50%

$1,040

+$90 (+9.5%)

5.50%

$962

+$12 (+1.3%)

+1%

6.50%

$891

$-59 (-6.2%)

+2%

7.50%

$826

$-124 (-13.0%)

Why Bonds Aren't Just "Safe" Savings

The bond market's inverse relationship means that when interest rates rise, your existing bond's value falls. A 1% rate increase can wipe out years of coupon payments for long-term bonds.

Interest Rate Risk

Long-term bonds (20+ years) are much more volatile than short-term bonds. A 30-year Treasury can lose 20%+ of its value if rates rise 2%.

The 'Default' Reality

Corporate bonds carry credit risk. A bond's yield reflects both interest rate risk and the issuer's creditworthiness. High yield = higher risk.

Inflation: The Bond Killer

Fixed coupon payments lose purchasing power in high-inflation environments. A 5% yield with 3% inflation means only 2% real return.

Bonds in 2026: Understanding Price-Yield Dynamics

Master the inverse relationship between bond prices and interest rates. Learn why "fixed" income requires active risk management.

The Price-Yield Relationship Explained

Bond Price Formula

Bond price is the present value of future coupon payments plus face value. For a bond with coupon C, face value F, yield y, and n periods:

P = \sum_{t=1}^{n} \frac{C}{(1+y)^t} + \frac{F}{(1+y)^n}

YTM (yield to maturity) is the rate y that makes this equal to the market price.

When Rates Rise:

New bonds

offer higher coupons, making existing bonds less attractive.
Bond prices fall

until their yield matches the new market rate.
Long-term bonds

suffer the most, as they're locked into lower rates for decades.

When Rates Fall:

Existing bonds

with higher coupons become more valuable.
Bond prices rise

as investors pay a premium for above-market yields.
Premium bonds

trade above face value, but you'll face a capital loss at maturity.

Bond Calculator FAQ

? Why do bond prices fall when interest rates rise?

When market interest rates increase, newly issued bonds offer higher coupon payments. Your existing bond with a lower coupon becomes less attractive, so its price must fall until its yield matches the new market rate. This is the fundamental inverse relationship in bond markets.

? What is the difference between coupon rate and yield?

The coupon rate is the fixed annual interest payment as a percentage of face value. Yield (YTM) is your actual return, accounting for the price you paid. If you buy a bond at a discount, your yield exceeds the coupon rate. If you pay a premium, your yield is lower than the coupon rate.

? Is a bond's YTM the same as its annual return?

YTM assumes you hold the bond to maturity and reinvest all coupon payments at the same YTM rate. Your actual annual return may differ if you sell early or reinvest at different rates. YTM is the best estimate of total return if held to maturity.

? What happens if I sell a bond before maturity?

Selling before maturity exposes you to interest rate risk. If rates have risen, you'll likely sell at a loss. If rates have fallen, you may realize a capital gain. The bond's price will reflect current market rates, not the original coupon rate.

? What is a 'Zero-Coupon' bond?

Zero-coupon bonds pay no periodic interest. Instead, they're sold at a deep discount to face value. Your return comes entirely from the price appreciation to face value at maturity. These bonds are the most sensitive to interest rate changes.

? What is the difference between clean price and dirty price?

The clean price is the bond's market price excluding accrued interest. The dirty price (also called invoice price) is the clean price plus accrued interest—this is what you actually pay when buying a bond between coupon dates. Bond markets typically quote clean prices, but you pay the dirty price.

? What are day-count conventions?

Day-count conventions are rules for calculating the number of days in interest periods. Actual/Actual (used for U.S. Treasuries) uses real calendar days. 30/360 (used for corporate bonds) assumes 30 days per month. The convention affects accrued interest calculations when bonds are traded between coupon dates.