Finance

Bond Yield Estimate Calculator

Roughly estimate current yield and yield to maturity for a bond.

The current yield shows the yearly coupon as a percentage of the price paid, while the approximate yield to maturity adds the gain or loss at redemption, so buying below face value lifts the second figure above the first and buying above face value would lower it.

Formula

Current yield is coupon divided by price; yield to maturity is approximated by coupon plus (face minus price over years), divided by the average of face and price.

How it works

This yield-to-maturity figure is an approximation, not the exact internal rate of return. It assumes coupons are held to maturity and the bond is redeemed at face value.

Worked example

For example, an annual coupon payment of $50 on a bond priced at $950 gives a current yield of 5.26%, because 50 divided by 950 equals 5.26%. With a face value of $1,000 and 10 years to maturity, the approximate yield to maturity is 5.64%, because (50 plus 5) divided by 975 equals 5.64%.

FAQs

Why does yield rise when price falls?
The same coupon on a lower price is a higher percentage return.

What is the difference between the two yields?
Current yield ignores the gain or loss at maturity; yield to maturity includes it.

Is the coupon fixed?
For most plain bonds, yes — that is why price moves when rates move.

Are these figures financial advice?
No — they are estimates for planning only, not financial advice. Check with a qualified adviser for decisions involving large sums.

Estimates only, not financial advice. Figures are approximate and do not include all fees, taxes, or changing rates unless stated.

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