# Bond Price Calculator

Calculate the current price for a bond using our bond price calculator.

$% % ## Bond Price:$
Learn how we calculated this below

## How to Calculate Bond Price

Bonds are one of the most important investment options you’ll find within the broader securities community. In fact, while speculative securities—like stocks—typically get much more attention in the media, most major financial players (particularly, banks) will actually own significantly more bonds than stocks.

When market conditions change, these institutions might make minor changes to their portfolio mix (preferring stocks during bull markets and bonds in recessions), but the pure dominance of bonds within the securities industry remains unrivaled.

Bonds, in theory, are instruments that entitle the bond holder to a predetermined payment at some predetermined point in time. There might also be a series of payments made along the way, which is known as the bond’s coupon.

Institutions enjoy investing in bonds because they are predictable and easy to acquire, and individual investors also frequently invest in bonds for the very same reason. But regardless of whether you are a bank or an individual investor, knowing how to calculate a bond’s price is important.

### Variables That Affect a Bond’s Price

In order to calculate a bond’s price, you will first need to identify several important variables:

• Coupon Rate (C): The promised payments the bond will make, periodically, between now and maturity.
• Face Value (FV): The amount the bond will pay out once it fully matures (typically, the face value is $1,000). • Yield to Maturity (R): The total return generated if someone were to hold the bond until maturity. • Number of Coupon Payments Per Year (N): How often coupon payments are made per year—one is standard, but some bonds will make biannual or monthly payments. • Years to Maturity (T): The total amount of time, in years, the bond has left until it pays out face value. ### Bond Price Formula Now that you have identified the variables needed to calculate bond price, all you need to do is plug these figures into the following formula: price = C \times \frac{ 1 − (1 + \frac{r}{n})^{−n \times t} }{ \frac{r}{n} } + \frac{ FV }{ (1 + \frac{r}{n})^{−n \times t} } [formula may scroll beyond screen] Where: C = coupon rate FV = face value r = yield to maturity n = number of coupon payments per year t = years to maturity Of course, if you don’t want to do all of the math yourself, using a bond price calculator like the one above can help. ### Zero Coupon Bond Price Formula While many bonds will issue coupon payments, some will only pay out once they are fully mature. These are known as zero-coupon bonds. To calculate the price of a zero-coupon bond, use the following formula: price = \frac{ FV }{ (1 + r)^{t} } Where: FV = face value r = yield to maturity t = years to maturity ### Example Let’s suppose that a bond has a face value of$1,000, an annual coupon payment of $30, 10 years to maturity, and a 5 percent yield to maturity. In this situation, you would receive$30 every year for the next 10 years, followed by a $1,000 final payment. If you were to buy the bond today—assuming there is no risk of default—this bond would cost$845.57.

price = \frac{30}{1000} \times \frac{ 1 − (1 + \frac{0.05}{1})^{−1 \times 10} }{ \frac{0.05}{1} } + \frac{ 1000 }{ (1 + \frac{0.05}{1})^{−0.05 \times 10} }
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price = \\$845.57
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You might also be interested in our bond yield calculator to find the current yield, which is the yield based on the purchase price of the bond rather than the face value. This is found by dividing the coupon payment by the purchase price, which is sometimes more accurate to find the true profitability of the bond.

### Perform bonds always go up in value?

Generally speaking, bonds will continue to increase in value as they get closer to maturity. This is because the final face value payment, which is almost always the largest portion of the bond, will come sooner, rather than later.

From an investor’s perspective, when all else is equal, you’ll want to get your money back as soon as possible. This is due to a concept known as the time value of money (TVM).

However, there are a few situations where bonds could decrease in value over time. If the bond has an unusual coupon structure, with high-priced coupons being paid out early, investing in the bond early on might be more beneficial.

In addition, interest rates impact bond prices, so when interest rates increase, bond prices typically decrease.

### Are bonds a safe investment?

In most cases, bonds are considered a safe investment. The payouts offered by bonds are guaranteed, so long as the issuer doesn’t default. Organizations like Moody’s and S&P rate the riskiness of default, with AAA bonds considered virtually risk-free and BBB bonds (or lower) considered a bit riskier.

The risk of investing in bonds will depend on who is issuing the bonds. If the bonds are from the United States government, they are considered very low risk because the government has never defaulted (and has the power to increase the money supply).

But if the bonds are issued by a corporation with clear insolvency issues, then the risk of default will be much higher.

This is not financial advice or a guarantee of success, so be sure to consult with a financial professional and understand the risk associated with any bond you are considering before investing.

### Why do people buy 10 year bonds?

The 10-year time period is used for many important financial matters, such as mortgage rates and bonds. When investors buy 10-year bonds, this typically signals investor confidence in the market. When confidence is high, the price of 10-year bonds typically decreases and yields rise.

10-year bonds are also a middle ground between low payout Treasury bills (T-bills) and higher risk, longer maturity Treasury bonds (T-bonds).

### What are the 5 types of bonds?

The 5 types of bonds are Treasury, Savings, Agency, Municipal, and Corporate.

Treasury bonds are issued by the US Treasury Leavement and are the safest types of bonds but also offer the lowest return. They are the most important because they are used to set the rates for other bonds and fund the federal government.

Savings bonds are also issued by the US Treasury Leavement but are for individual investors. They are usually offered in lower amounts than Treasury bonds to make them affordable to individual investors.

Agency bonds are issued by agencies such as Fannie Mae or Freddie Mac and are guaranteed by the federal government.

Municipal bonds are issued by cities and offer lower rates than corporate bonds, but are tax-free. They are generally more risky than federal government bonds because cities can, and sometimes do, default on them.

Corporate bonds are sold by banks representing various types of companies. They offer higher rates of return than bonds issued by the federal government because they carry a higher risk.

There are 3 types of corporate bonds: junk bonds or high-yield bonds, preferred stocks (act like bonds), and certificates of deposit (CDs). High-yield bonds usually offer the highest return because they are at the greatest risk of default. Preferred stocks act like bonds and pay the investor a set dividend at regular time periods. CD’s are a loan to the bank that guarantees a certain rate of return for a period of time.