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Bond Yield Formula:
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Bond yield is a measure of the return on a bond investment, calculated as the annual coupon payment divided by the bond's current market price. It represents the income return on an investment in bonds.
The calculator uses the basic bond yield formula:
Where:
Explanation: The formula calculates the simple yield by dividing the annual coupon payment by the bond's price. This gives the yield as a decimal, which is typically converted to a percentage.
Details: Yield calculation is essential for comparing different bond investments, assessing their relative value, and making informed investment decisions.
Tips: Enter the annual coupon payment and current bond price in USD. Both values must be positive numbers, with the bond price greater than zero.
Q1: What's the difference between current yield and yield to maturity?
A: Current yield only considers the coupon payments, while yield to maturity accounts for both coupon payments and any capital gain/loss if held to maturity.
Q2: What are typical bond yield ranges?
A: Yields vary by bond type and market conditions, but investment-grade bonds typically yield 2-6%, while high-yield bonds may offer 5-10% or more.
Q3: Why do bond prices and yields move inversely?
A: When bond prices rise (due to increased demand), the fixed coupon payment represents a smaller percentage of the price, so yields fall, and vice versa.
Q4: Does this calculator work for zero-coupon bonds?
A: No, zero-coupon bonds don't make periodic interest payments, so their yield is calculated differently based on the discount at purchase and face value at maturity.
Q5: How often should I check bond yields?
A: For active bond investors, monitoring yields regularly (weekly or monthly) is recommended as they fluctuate with market conditions and interest rate changes.