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Bond Yield Calculator
Calculate current yield and yield to maturity for bonds.
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Is This Bond Actually Making Money?
Bonds don't just pay what's on the label. A bond with a 5% coupon might actually yield 6.2% if you bought it at a discount—or just 4.1% if you overpaid. The current yield tells you your annual income, but Yield to Maturity (YTM) tells you your total return if you hold until the end.
This calculator shows you both, so you know what you're really earning.
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💡 Expert Tip
Don't confuse the coupon rate with your actual return. A bond pays a 5% coupon, but if you bought it for $950 instead of $1,000, your current yield is actually 5.26%. And if you hold it 10 years, your YTM could be 5.8% because you'll get that $50 gain when it matures.
The market price changes, but the coupon stays fixed. That's why yields move inversely to prices.
David Chen, CFA: "When interest rates rise, bond prices fall. Don't panic sell. If you hold to maturity, you still get your full principal back (assuming no default). The 'loss' is only on paper."
⚠️ Common Mistake: Buying Bonds at a Premium
If you pay $1,050 for a $1,000 bond, you'll lose $50 when it matures. That $50 loss eats into your coupon income. Always check the YTM—it accounts for this.
Example: A 4% coupon bond selling for $1,100. Current yield = 3.64%. But YTM might be just 2.5% over 10 years because you're losing $100 at maturity.
📐 The Math Behind Bond Yields
Current Yield is simple:
Yield to Maturity (YTM) is trickier. This calculator uses an approximation formula that's accurate within ~0.1-0.2%:
The exact YTM requires solving a complex equation (IRR of cash flows). For most purposes, this approximation is close enough.
🎯 When to Use This Calculator
- Comparing bonds: Bond A yields 4.2%, Bond B yields 4.8%. Which is better?
- Pricing analysis: Should I buy this bond at $960 or wait for a better price?
- Portfolio planning: What's my real fixed-income return after accounting for premiums/discounts?
❓ Frequently Asked Questions
What is the difference between current yield and yield to maturity?
Current yield is just the annual coupon divided by the current price—it ignores capital gains. Yield to maturity (YTM) includes both the coupon payments AND the gain (or loss) if you hold the bond until maturity. YTM is the real return.
How do you calculate bond yield?
Current Yield = (Annual Coupon Payment / Current Price) × 100. For YTM, use the approximation formula: YTM ≈ [Coupon + (Face Value - Price) / Years] / [(Face Value + Price) / 2].
Why is YTM higher when bonds trade below par?
If you buy a $1,000 bond for $950, you get the coupon payments PLUS a $50 gain when it matures at $1,000. That extra $50 boosts your total return, which is why YTM is higher than the coupon rate.