1. What is Bond Current Price?

The current price of a bond is the present value of all future cash flows (coupon payments and face value at maturity) discounted at the bond's yield to maturity. It represents what investors are willing to pay for the bond in the market.

2. How Does the Calculator Work?

The calculator uses the bond pricing formula:

Where:

• \( C \) — Coupon payment per period
• \( F \) — Face value of the bond
• \( r \) — Periodic yield (YTM divided by payments per year)
• \( n \) — Total number of periods (years × payments per year)

Explanation: The formula calculates the present value of all future coupon payments and the face value at maturity, summing them to get the bond's current price.

3. Importance of Bond Pricing

Details: Accurate bond pricing is essential for investors to determine fair value, assess investment opportunities, and manage fixed income portfolios effectively.

4. Using the Calculator

Tips: Enter face value, coupon rate, yield to maturity, years to maturity, and payment frequency. All values must be positive and valid.

5. Frequently Asked Questions (FAQ)

Q1: Why does bond price change when yield changes?
A: Bond prices and yields have an inverse relationship. When market interest rates rise, existing bond prices fall to make their fixed coupon payments competitive.

Q2: What happens when bond is priced at par?
A: When bond price equals face value, the coupon rate equals the yield to maturity.

Q3: What's the difference between coupon rate and yield?
A: Coupon rate is fixed and determines periodic payments, while yield reflects current market return expectations.

Q4: How does maturity affect bond price?
A: Longer-term bonds are more sensitive to interest rate changes, experiencing greater price volatility.

Q5: What does it mean when bond is priced at discount/premium?
A: Discount means price < face value (yield > coupon rate). Premium means price > face value (yield < coupon rate).