FINANCIAL · BOND YIELD
Bond Yield Calculator
Calculate current yield, yield to maturity (YTM), and yield to call (YTC) for any bond. Uses semiannual compounding per US bond market convention.
YTM uses semiannual compounding (US bond market convention). State taxes not included.
About This Calculator
A bond's yield measures the return an investor earns relative to its price. This calculator computes three key metrics: current yield (annual coupon divided by market price), yield to maturity (YTM — the total return if held to maturity), and optionally yield to call (YTC — if the bond is callable). All yields use semiannual compounding per US bond market convention.
How It Works
Enter the bond's face value, annual coupon rate, current market price, and years to maturity. For callable bonds, also enter the call price and years to first call. Current yield is a simple ratio. YTM and YTC are solved iteratively using a Newton-Raphson algorithm that finds the discount rate making the discounted cash-flow price equal to the market price.
The Formula
YTM: Price = Σ[C/2 / (1+y/2)^t] + F / (1+y/2)^(2N)
- C
- annual coupon payment (face value × coupon rate)
- F
- face value (par value of the bond)
- N
- years to maturity
- t
- semiannual period index (1 to 2N)
- y
- bond-equivalent yield (YTM) — solved iteratively
Frequently Asked Questions
- What is the difference between current yield and YTM?
- Current yield is simply the annual coupon divided by the current market price — a snapshot ratio that ignores capital gains or losses as the bond approaches maturity. YTM accounts for all future coupon payments plus the return of face value at maturity, making it the more accurate measure of total return if you hold the bond to maturity.
- Why does a bond sell at a premium or discount to par?
- If market interest rates fall below a bond's coupon rate, investors bid up the price above par (premium) to lower its effective yield. If rates rise above the coupon rate, the price falls below par (discount) to raise the yield. At par, the coupon rate equals the market rate.
- What does yield to call mean?
- YTC is the return earned if the issuer calls (redeems) the bond before maturity at a specified call price on the first call date. Callable bonds give the issuer the option to refinance when rates fall, so YTC is typically relevant when a bond trades at a premium and the call date is near.
- Why does this calculator use semiannual compounding?
- US Treasury, corporate, and municipal bonds pay coupons semiannually and are conventionally quoted as a bond-equivalent yield — twice the semiannual rate. This is the market standard. Bonds in some other countries use annual compounding; adjust accordingly if comparing foreign bonds.