Our bond calculator is a research and learning tool, which makes it possible for an investor to calculate the price or yield of a bond on the basis of several variables. Additionally, the calculator displays some of the more noteworthy indicators of investment risk.

Manual

You can enter the following factors into the calculator:

Principal is the face value of the bond, the sum, which will be paid to the investor at the maturity.

Coupon rate in the nominal rate on interest paid on the principal. Coupons on bonds can be floating instead of fixed. The coupons on floating or adjustable rate bonds are reset at periodic intervals that vary depending on the individual bond. These bonds reset at periodic intervals that vary depending on the individual bond. These bonds reset at a stated spread above a given index. Our calculator does not calculate floating rate bonds.

Compounding period shows the frequency of the coupon payments per year. Although coupons are quoted at an annual rate, they are most frequently paid to the investor twice a year. Bonds also may pay interest quarterly, or annually, but these payment schedules are less common. Monthly schedule is too uncommon to be included in our calculator. Zero coupon bonds repay only the initial principal amount at maturity. If you enter 0 for the coupon rate, our calculator will understand that it is dealing with a zero coupon bond.

Settlement date is the date on which you traded, or intend to trade, the bond. The price of the bond will be shown for that date.

Maturity is the date on which the principal and the last coupon (if any) will be repaid.

Year basis offers the choice of several systems, which are used to deal with the incompatibility of astronomical time and the decimal system. If a bond is traded between coupon dates, the seller will want the fraction of the coupon equal to the fraction of time since the last payment. Calendar year (ACT) can be divided by 360, 365, or itself. US30 system usually turns the 31. day of the month into the 1. day of the following month, except if the starting date is 30. or 31. of a month, in which case 30. of the same month is used. European 30 system always uses the 30. day of the same month. Description of a bond should also state the system, in which this fraction is calculated.

You can Calculate either the price for expected yield (or prevailing interest rate) or the yield for the current price by choosing the right option.

The measures of risk shown on our calculator are developed at the beginning of the 20. century by actuaries for their own purposes, which explains the somewhat puzzling units.

Macaulay duration demonstrates the sensitivity of the bond price to change in prevailing interest rate or yield. It represents time to maturity, adjusted to present value, of the cash flows of a bond (or implicit flows of an interest rate derivative). The earlier and the bigger the coupon payments, the shorter the Macaulay duration, the lesser the risk. You can think of it as the balancing point of the seesaw, along which coupon payments are stacked. Macaulay duration does not usually exceed 14 years, so the risk on 50 and 100-year bond would appear to be equal. For a zero bond, the Macaulay duration equals its maturity.

Modified duration is an attempt to measure the expected change in price of a bond for a given change in yield. Mathematically it is the percentage change in bond price, caused by 1% change in yield. This measure is most accurate for small changes in interest rates.

Basis point value shows a change in value of a bond (or interest rate derivative) for a change of one basis point (1/100 per cent) in bond's yield. Approximately one hundredth of the modified duration.

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