1. What is Bond Return?

Bond return, also known as yield, measures the total earnings from a bond investment including both coupon payments and capital gains or losses from price changes.

2. How Does the Calculator Work?

The calculator uses the bond return formula:

Where:

• \( Coupon \) — Periodic interest payment received from the bond
• \( Face \) — Face value (par value) of the bond at maturity
• \( Purchase \) — Purchase price of the bond

Explanation: The formula calculates the total return by combining the coupon payment with the capital gain/loss (difference between face value and purchase price), then dividing by the investment amount (purchase price).

3. Importance of Bond Return Calculation

Details: Calculating bond return helps investors compare different fixed-income investments, assess performance, and make informed investment decisions.

4. Using the Calculator

Tips: Enter all values in dollars. Coupon is the periodic payment received, Face is the bond's maturity value, and Purchase is what you paid for the bond. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between current yield and total return?
A: Current yield only considers coupon payments, while total return includes both coupons and capital gains/losses.

Q2: How does bond maturity affect return?
A: Longer maturity bonds typically offer higher returns to compensate for increased interest rate risk.

Q3: What if I sell the bond before maturity?
A: Replace Face value with your selling price in the calculation to determine your actual return.

Q4: How does coupon frequency affect return?
A: This calculator assumes a single coupon payment. For multiple payments, sum all coupons received during your holding period.

Q5: What are typical bond return ranges?
A: Returns vary by bond type and market conditions, but investment-grade bonds typically return 2-5% annually.