Treasury Bond Calculator

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Treasury Bond Valuation Calculator

Annual Semi-Annual Quarterly

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Estimated Market Price:
Periodic Coupon Payment:
Total Interest Payments:
Bond Status:
function calculateBondPrice() { var faceValue = parseFloat(document.getElementById('faceValue').value); var annualCouponRate = parseFloat(document.getElementById('couponRate').value) / 100; var years = parseFloat(document.getElementById('years').value); var annualYTM = parseFloat(document.getElementById('ytm').value) / 100; var frequency = parseInt(document.getElementById('frequency').value); if (isNaN(faceValue) || isNaN(annualCouponRate) || isNaN(years) || isNaN(annualYTM)) { alert('Please enter valid numeric values.'); return; } var periods = years * frequency; var periodicRate = annualYTM / frequency; var periodicCoupon = (faceValue * annualCouponRate) / frequency; var price = 0; for (var t = 1; t faceValue + 0.01) { status = "Premium"; } else if (price < faceValue – 0.01) { status = "Discount"; } else { status = "At Par"; } document.getElementById('resPrice').innerText = "$" + price.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resCoupon').innerText = "$" + periodicCoupon.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resTotalInt').innerText = "$" + totalInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resStatus').innerText = status; document.getElementById('bondResult').style.display = 'block'; }

Understanding Treasury Bond Valuation

A Treasury Bond (T-Bond) is a fixed-interest government debt security with a maturity of more than 10 years. Investors use the treasury bond calculator to determine the fair market price of a bond based on current market conditions and interest rate fluctuations.

The Relationship Between Price and Yield

In the world of fixed income, bond prices and interest rates (yields) have an inverse relationship. When the market interest rate (Yield to Maturity) rises above the bond's fixed coupon rate, the bond becomes less attractive, and its price drops below the face value (trading at a discount). Conversely, if market rates fall, the bond price rises above the face value (trading at a premium).

Key Terms Explained

  • Face Value (Par Value): The amount the government will pay you back at the end of the term. Usually $1,000 for US Treasuries.
  • Coupon Rate: The fixed annual interest rate the bond pays.
  • Yield to Maturity (YTM): The total return anticipated on a bond if it is held until it matures. This represents the "market price" of money.
  • Payment Frequency: Most US Treasury bonds pay interest semi-annually (twice a year).

The Math Behind the Calculation

The price of a bond is calculated as the present value of all future coupon payments plus the present value of the face value paid at maturity. The formula is:

Price = [Σ (C / (1 + r)^t)] + [FV / (1 + r)^n]

Where:

  • C: Periodic coupon payment
  • r: Periodic yield to maturity (Annual YTM / Frequency)
  • n: Total number of periods
  • FV: Face value

Example Calculation

Imagine you have a 10-year Treasury Bond with a face value of $1,000 and a 5% coupon rate. If the current market Yield to Maturity (YTM) is 4%, and the bond pays semi-annually:

  • Coupon Payment: $25 every 6 months ($50 per year).
  • Total Periods: 20 (10 years × 2).
  • Market Price: Because the market yield (4%) is lower than the coupon (5%), the bond will be priced at a premium, costing roughly $1,081.76.

This calculator handles the complex summation of these cash flows to give you an immediate market valuation, helping you make informed investment decisions in the secondary market.

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