Bond Yield Calculator
A Bond's Coupon Rate Isn't Its Real Return
A bond's coupon rate is fixed at issuance, but its price moves in the secondary market as interest rates change — and that price movement changes the actual return a buyer gets. Current yield captures the income relative to today's price; yield to maturity goes further, folding in the gain or loss from buying at a discount or premium to face value.
The Formulas
YTM (approx.) = [C + (F − P) ÷ n] ÷ [(F + P) ÷ 2] × 100
C is the annual coupon payment, F is face value, P is the current price, and n is years to maturity. The YTM formula here is the standard approximation, not the exact iterative solution — it's accurate enough for most comparisons but can diverge slightly from the precise figure on deeply discounted or premium bonds.
Why the Two Numbers Diverge
- Bond trading below face value — a discount means YTM will run higher than current yield, since the buyer also captures the gain to par at maturity.
- Bond trading above face value — a premium means YTM will run lower than current yield, since the buyer loses that premium back down to par by maturity.
- Comparing bonds across maturities — two bonds with identical current yields can have very different YTMs if their prices relative to face value differ.
A $1,000 Face Value Bond, 5% Coupon, at Different Prices
| Current Price | Current Yield | YTM (approx.) |
|---|---|---|
| $900 (discount) | 5.556% | 6.316% |
| $950 (discount) | 5.263% | 5.641% |
| $1,000 (par) | 5.000% | 5.000% |
| $1,050 (premium) | 4.762% | 4.390% |
| $1,100 (premium) | 4.545% | 3.810% |
At par (price equals face value), current yield and YTM both equal the coupon rate exactly — a useful sanity check on the formula.
How to Use This Calculator
- Choose the mode: Current Yield or Yield to Maturity (Approx.).
- For Current Yield, enter the Annual Coupon Payment and Current Bond Price.
- For YTM, also enter the Face Value and Years to Maturity.
- Select Calculate to see the yield result.
Related Calculations
Comparing bond income to a savings account rate? Check the APY Calculator, or evaluate a stock's income instead with the Dividend Calculator.