Bond Yield Calculator
Calculate various bond yields including current yield, yield to maturity (YTM), and yield to call. This comprehensive calculator helps assess bond returns and compare investment opportunities.
Bond Information
Optional Call Features
Leave blank if bond is not callable
Yield Results
Current Yield:
0.00%
Yield to Maturity (YTM):
0.00%
Yield to Call (YTC):
N/A
Bond Analysis
Coupon Rate:
0.00%
Premium/Discount:
Expected Return:
0.00%
Investment Insights
Yield Spread:
0.00%
Attractiveness:
N/A
Recommendation:
N/A
Understanding Bond Yields
Bond yields represent the return an investor can expect from a bond investment. Different yield measures provide various perspectives on bond returns, from simple income generation to total return calculations.
Types of Bond Yields
Current Yield
- Annual coupon / Current price × 100
- Measures income generation
- Simple and straightforward
- Doesn't include capital gains/losses
Yield to Maturity (YTM)
- IRR of bond cash flows
- Includes all coupon payments and face value
- Assumes reinvestment at YTM
- Total return if held to maturity
Yield to Call (YTC)
- Yield if bond is called
- Uses call price instead of face value
- Important for callable bonds
- Lower than YTM for premium bonds
YTM Calculation
Solving for YTM
Finding the discount rate that makes PV of cash flows equal to price
Trial and Error Method
- Guess a yield rate
- Calculate present value of cash flows
- Adjust yield until PV equals price
- Iterative process
Approximation Formula
- YTM ˜ [C + (F-P)/n] / [(F+P)/2]
- C = Annual coupon
- F = Face value
- P = Current price
- n = Years to maturity
Yield Relationships
| Bond Type | Current Yield vs Coupon | YTM vs Coupon |
|---|---|---|
| Premium Bond | Current > Coupon | YTM < Coupon |
| Par Bond | Current = Coupon | YTM = Coupon |
| Discount Bond | Current < Coupon | YTM > Coupon |
Factors Affecting Yields
Market Interest Rates
- Inverse relationship with bond prices
- Rising rates increase yields
- Falling rates decrease yields
- Yield curve shape matters
Credit Quality
- Higher credit risk = Higher yields
- Credit rating impacts spreads
- Default risk premium
- Recovery rates
Callable Bond Considerations
Yield to Call
- Relevant for callable bonds
- Uses call price and call date
- Lower than YTM for premium bonds
- Issuer's perspective on returns
Call Protection
- Non-callable period
- Call premium over face value
- Impact on yield calculations
- Investor protection features
Practical Applications
Bond Valuation
- Fair value assessment
- Relative value analysis
- Portfolio rebalancing
- Risk-adjusted returns
Investment Strategy
- Yield curve positioning
- Credit quality assessment
- Duration management
- Income generation planning
Yield Calculation Assumptions
Standard Assumptions
- All payments made as scheduled
- Bond held to maturity or call
- Coupons reinvested at YTM
- No transaction costs
Real-World Adjustments
- Taxes on coupon payments
- Transaction costs
- Liquidity considerations
- Reinvestment risk
Key Takeaways for Bond Yield Calculator
- Current yield = (Annual coupon / Current price) × 100 measures income return but ignores capital gains/losses
- YTM is the total return if the bond is held to maturity and all coupons are reinvested at the YTM rate
- YTC calculates the yield if a callable bond is called at the first call date using the call price
- For premium bonds, YTM < coupon rate; for discount bonds, YTM > coupon rate
- Bond yields and prices have an inverse relationship - rising yields decrease bond prices
- Credit quality affects yields, with higher risk bonds offering higher yields to compensate investors
- YTM calculations assume regular coupon payments and no default risk
- Use the calculator to compare bond investments and assess relative value