Estimate the Yield to Maturity (YTM) of a corporate or government bond.
The amount paid back at maturity (usually $1,000).
The price you pay today to buy the bond.
The interest percentage paid annually on Par Value.
Time remaining until the bond expires.
Expected Rate of Return (Approx. YTM):–
Current Yield:–
Annual Coupon Payment:–
Total Capital Gain/Loss:–
Understanding Bond Expected Rate of Return
The expected rate of return on a bond is most commonly measured by its Yield to Maturity (YTM). Unlike a simple savings account, a bond's return is composed of two distinct parts: the periodic interest payments (coupons) and the difference between the price you pay today and the face value returned at maturity.
This calculator helps investors determine if a bond is trading at a discount (price below par) or a premium (price above par) and what the annualized return will be if the bond is held until it matures.
How is it Calculated?
While exact YTM calculation requires complex iterative algorithms, this tool uses the standard industry approximation formula, which is highly accurate for standard maturities. The formula balances the annual coupon income with the annualized capital gain or loss.
YTM ≈ [ C + ( F – P ) / n ] / [ ( F + P ) / 2 ]
Where:
C: Annual Coupon Payment (Face Value × Coupon Rate)
F: Face Value (Par Value)
P: Current Market Price
n: Years to Maturity
Key Factors Affecting Bond Returns
Several variables impact the expected return of a fixed-income security:
Market Price vs. Par Value: If you buy a bond for $950 that matures at $1,000, your return is boosted by that $50 gain. Conversely, buying at a premium lowers your total return.
Coupon Rate: Higher coupon rates provide more immediate cash flow, increasing the current yield.
Time to Maturity: The longer the duration, the more the bond price fluctuates with interest rate changes, affecting the calculation if sold early.
Current Yield vs. Yield to Maturity
It is important to distinguish between these two metrics:
Current Yield: This is simply the annual coupon payment divided by the current price. It ignores the capital gain or loss at maturity.
Yield to Maturity (YTM): This is the total expected return, accounting for coupon payments and the profit/loss from the principal value difference over time. This is the figure calculated above.
function calculateBondReturn() {
// Get input values using var
var parValue = parseFloat(document.getElementById('bondParValue').value);
var currentPrice = parseFloat(document.getElementById('bondCurrentPrice').value);
var couponRate = parseFloat(document.getElementById('bondCouponRate').value);
var years = parseFloat(document.getElementById('bondYears').value);
// Validation
if (isNaN(parValue) || isNaN(currentPrice) || isNaN(couponRate) || isNaN(years)) {
alert("Please enter valid numbers in all fields.");
return;
}
if (years <= 0 || parValue <= 0 || currentPrice = 0 ? "+$" : "-$";
document.getElementById('resCapitalGain').innerHTML = gainSign + Math.abs(capitalGain).toFixed(2);
// Color coding for Capital Gain
if (capitalGain > 0) {
document.getElementById('resCapitalGain').style.color = "#27ae60"; // Green
} else if (capitalGain < 0) {
document.getElementById('resCapitalGain').style.color = "#c0392b"; // Red
} else {
document.getElementById('resCapitalGain').style.color = "#2c3e50"; // Dark Blue
}
}