1. What is Bond Price Calculation?

The bond price calculation determines the present value of all future cash flows from a bond (coupon payments and face value) discounted at the bond's yield to maturity. This helps investors assess whether a bond is fairly priced in the market.

2. How Does the Calculator Work?

The calculator uses the bond pricing formula:

Where:

• \( Coupon \) — Periodic coupon payment amount
• \( Yield \) — Yield to maturity (as decimal)
• \( t \) — Each payment period (1 to n)
• \( Face\ Value \) — Bond's par value at maturity
• \( n \) — Total number of periods to maturity

Explanation: The formula discounts each future cash flow back to present value and sums them all to determine the bond's fair price.

3. Importance of Bond Pricing

Details: Accurate bond pricing is essential for investors to make informed decisions, compare bonds, and understand the relationship between price and yield.

4. Using the Calculator

Tips: Enter coupon payment in dollars, yield as percentage, number of payment periods, face value in dollars, and total periods to maturity. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the relationship between yield and price?
A: Bond prices and yields move inversely - when yields rise, prices fall, and vice versa.

Q2: How does coupon rate affect price?
A: Higher coupon bonds generally trade at higher prices than lower coupon bonds with the same yield and maturity.

Q3: What's the difference between clean and dirty price?
A: Clean price excludes accrued interest, while dirty price includes it. This calculator gives dirty price.

Q4: How does time to maturity affect price?
A: Longer-term bonds are more sensitive to yield changes (have higher duration).

Q5: Can this be used for zero-coupon bonds?
A: Yes, just set coupon to 0 and n_periods to the maturity period.