Enter the face value, coupon rate, years to maturity, payment frequency, and the market's required yield to find the bond's fair price and current yield.
A bond's coupon payments are fixed at issuance, so when market interest rates rise, newly issued bonds offer better yields, making the older, lower-fixed-coupon bond less attractive by comparison — its price has to fall so its effective yield rises to match the new market rate. The reverse happens when market rates fall: the old bond's fixed coupon suddenly looks relatively better, so its price rises above face value.
Coupon rate is the fixed annual rate stated on the bond at issuance, based on face value — it never changes. Current yield is annual coupon income divided by the bond's current market price, so it moves as the price moves. Yield to maturity (YTM) is the total return if held to maturity, factoring in price, all coupon income, and any gain or loss from buying at a premium or discount — it's the most complete measure of the three, though this calculator focuses on price and current yield.
A bond trades at a premium when its price is above face value, which happens when its coupon rate is higher than the current market yield — investors are willing to pay extra for the above-market coupon. It trades at a discount when its price is below face value, because its coupon rate is lower than the market yield and the price has to fall to make up the difference. A bond priced exactly at face value is trading at par.
Most bonds pay interest semi-annually — twice a year — which is why this calculator defaults to 2 payments per year, but annual, quarterly, and even monthly payment schedules exist depending on the issuer and market. For general lump-sum growth without a bond's periodic coupon structure, see the Investment Calculator.
Worked example: a $1,000 face-value bond with a 5% annual coupon rate, 10 years to maturity, semi-annual payments, and a 6% required market yield. The semi-annual coupon payment is 1,000 × 5% ÷ 2 = $25, discounted at 3% per period across 20 periods, plus the $1,000 face value discounted back the same 20 periods. That works out to a price of $925.61 — a discount to face value, since the 5% coupon is below the 6% market yield. Total coupon income over the bond's life is 25 × 20 = $500, and the current yield is 50 ÷ 925.61 ≈ 5.40%.