1. What is Bond Yield?

Bond yield is the return an investor realizes on a bond. It represents the annual interest payment divided by the bond's current market price. Yield is a key metric for comparing different bonds and assessing their relative value.

2. How Does the Calculator Work?

The calculator uses the basic bond yield formula:

Where:

• Annual Interest — The yearly coupon payment in USD
• Current Price — The bond's current market price in USD

Explanation: The formula calculates the bond's current yield, which differs from yield to maturity as it doesn't account for price appreciation/depreciation if held to maturity.

3. Importance of Bond Yield

Details: Yield helps investors compare bonds with different prices and coupon rates. It's crucial for assessing investment returns, especially in fixed-income portfolios.

4. Using the Calculator

Tips: Enter the bond's annual interest payment and current market price in USD. Both values must be positive numbers (price must be greater than zero).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between current yield and yield to maturity?
A: Current yield only considers annual interest payments, while yield to maturity accounts for total returns including price changes if held to maturity.

Q2: Why does yield increase when bond price falls?
A: Yield is inversely related to price - as price drops, the fixed coupon payments represent a larger percentage of the investment.

Q3: What are typical bond yield ranges?
A: Government bonds typically yield 1-5%, corporate bonds 3-8%, with higher yields indicating higher risk.

Q4: How often is bond yield calculated?
A: Yield is typically calculated and quoted daily as bond prices fluctuate in secondary markets.

Q5: Does this calculator work for zero-coupon bonds?
A: No, zero-coupon bonds don't pay periodic interest, so their yield is calculated differently based on price discount.