Bond Price, Yield, & Risk Calculator

Use this to calculate bond price and the risk when interest rate changes.

Bond Features
clear
Bond type
To calculate
Input bond price
Input bond yield
Coupon rate (annual) Coupon paid
Maturity date Valuation date
Notional amount unit × =
Key Output
Bond price
Bond yield
Coupon
Accrued interest
Initial investment = Bond price / 100 * National amount + Accrued interest
Bond duration A measurement of a bond's price sensitivity to interest rate changes. (Technical definition: the weighted average of the times until those bond cash flows are received by bondholders)
Interest Rate Risk
If interest rate +
, price will drop to
Investment capital gain
probability in 1 month in 1 year
% loss can be (worse than)
$ loss can be (worse than)
This tool helps answer :
  1. Given the bond features input, what is the bond price, yield, and duration?
  2. What is the bond price sensitivity to the change in interest rate?
  3. How likely and how much I may suffer an unrealized capital loss, due to interest rate going up?
to know more Find more in this calculator :
  • If a bond has longer maturity or longer duration, it will have greater interest rate risk.
  • The bond's coupon rate has minimal impact on interest rate risk.
Bond investment 101

When investing in U.S. bonds, there are several factors to consider to make an informed decision. Here are the key elements:

  1. Bond Type

    U.S. bonds come in different forms, each with its own characteristics:

    • Treasury (T-Bills, T-Notes, T-Bonds): These are bonds issued by the U.S. government with different maturity. They are considered credit-risk-free, but not interest-rate-risk-free.
    • Municipal Bonds (Munis): Issued by local governments (cities, states), and they offer federal-income-tax-free advantages.
    • Corporate Bonds: These bonds are issued by companies with relatively stable financial conditions and high credit ratings. They offer higher returns but come with more credit risk than Treasury and Municipal bonds.
    • High-Yield Bonds (Junk Bonds): These bonds are issued by companies with lower credit ratings. They offer highest returns but come with much more risk due to the higher likelihood of issuer default or bankruptcy.

  2. Interest Rate Risk
    • Current Interest Rates: U.S. Treasury bonds' yields normally move consistently to the Federal Reserve's interest rates. If the Fed is raising rates, bond prices may fall and yields may rise.
    • Future Rate Expectations: It's important to foresee the direction of interest rates and be prepared, as this can influence the return on bonds, especially if rates rise after purchase.

  3. Credit Risk
    • Credit Quality: U.S. Treasury bonds have virtually no credit risk as they are backed by the full faith and credit of the U.S. government. However, for other bonds, such as municipal or corporate bonds, assess the credit rating of the issuer. Bond rating agencies like Moody's, S&P, and Fitch provide these ratings.
    • Credit Spreads: Bonds with lower credit ratings (e.g., junk bonds) typically offer higher yields to compensate for additional risk.

  4. Inflation Risk
    • Inflation erodes the purchasing power of fixed-income payments. Consider bonds that adjust with inflation, such as Treasury Inflation-Protected Securities (TIPS), which offer protection against inflation.

  5. Maturity and Duration
    • Maturity: The length of time until the bond matures. Short-term bonds (1-3 years) are less sensitive to interest rate changes than long-term bonds (10+ years).
    • Duration: This measures the sensitivity of the bond's price to interest rate changes. Bonds with a longer duration are more sensitive to interest rate changes than those with a shorter duration.

  6. Yield and Coupon Payments
    • Coupon Rate: The interest rate paid by the bond. Higher coupon rates typically result in higher periodic income but may be associated with higher price.
    • Yield to Maturity (YTM): The total return expected if the bond is held until it matures, taking into account the bond's current market price, coupon payments, and the time to maturity.
    • Yield to Call (YTC): Relevant for callable bonds. This is the yield assuming the bond is called (redeemed early by issuer) before maturity.

  7. Tax Considerations
    • Interest income Taxation: Interest income from bonds is subject to federal & state income tax, except for municipal bonds. Zero coupon bonds, such as T-Bills, still generate interest income and that will be taxed.
    • Capital Gains Tax: If you sell a bond before maturity at a profit, the capital gains may be taxed.

  8. Liquidity
    • Bonds can be less liquid than stocks, meaning it might be harder to sell them before maturity without lowering the selling price.

  9. Economic and Political Factors
    • Government Debt Levels: Consider the overall economic situation and government debt levels, as excessive debt could influence bond yields or credit risk.
    • Political Stability: Changes in government, fiscal policy, and other political factors can impact bond prices and yields.

  10. Diversification
    • U.S. bonds can be a great way to diversify a portfolio, particularly for risk-averse investors. A mix of bond types (T-Bonds, corporate bonds, etc.) across different maturities and credit qualities may help reduce risks.

  11. Risk Tolerance
    • Assess your own risk tolerance. Government bonds are considered low risk but offer lower returns. Corporate & high yield bonds, on the other hand, can offer better yields but come with more credit risk.

  12. Bond Fund vs. Individual Bonds
    • Bond Funds (including ETF): These allow for easier diversification across different bonds and are professionally managed, but they may charge fees. They also don't have a fixed maturity date, unlike individual bonds.
    • Individual Bonds: These allow you to hold bonds to maturity to match your cash flow needs, but it requires a larger investment to diversify across different types.

By weighing these factors, you should make an investment decision that aligns with your financial goals, risk tolerance, and time horizon.

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