Calculate a bond's current yield and approximate yield to maturity (YTM). Enter the face value, coupon rate, current market price, and years to maturity to evaluate bond investments. Compares premium vs discount pricing.
Bonds quote two yields that are easy to confuse and important to keep separate. Current yield is simple: it's the annual coupon payment divided by the current market price. If a bond pays $50 per year and trades at $1,000, current yield is 5%. If the same bond trades at $950, current yield is 5.26%. The number is easy to compute and easy to misunderstand — it ignores the fact that the bond will eventually mature at face value, which usually differs from the current price.
Yield to maturity (YTM) fixes that. YTM is the annualized total return you earn if you buy the bond at today's price, collect every coupon, and hold it until it matures and pays back face value. It accounts for both the coupon income and the capital gain (if buying at a discount) or loss (if buying at a premium). YTM is the right number for comparing bonds with each other and for deciding whether a bond is "worth it" relative to alternative investments.
This calculator computes both yields. The current yield is exact; YTM is computed using a well-known approximation formula that's accurate to within a few basis points for typical bonds. Use both yields together: current yield tells you the annual cash flow as a percent of investment; YTM tells you the all-in annualized return assuming you hold to maturity.
$1,000 face value, 4% coupon ($40/year), trading at $920, 8 years to maturity. Current yield: $40 / $920 = 4.35% YTM: ~5.20% The bond's 4% coupon is below the implied market yield of ~5.2%. Investors require the discount price (paying $920 to receive $1,000 at maturity) to make up the difference. Buying at the discount and holding to maturity produces a total annualized return higher than the coupon rate.
$1,000 face value, 7% coupon ($70/year), trading at $1,080, 6 years to maturity. Current yield: $70 / $1,080 = 6.48% YTM: ~5.40% The bond's 7% coupon is above current market rates. Investors bid the price above face value, knowing they'll receive $1,000 at maturity (a $80 capital loss). The YTM (5.40%) is the actual annualized return after accounting for the price loss — lower than the coupon rate.
Bond purchased at par: $10,000 face, 3% coupon, 20 years to maturity. Current yield = YTM = 3% at purchase. Two years later, market rates have risen to 5%. The bond now trades at approximately $7,300 (a 27% price loss). For a new buyer at $7,300: Current yield: $300 / $7,300 = 4.11% YTM: ~5.0% (matches new market rates) This is why bond prices and rates move inversely. The bond's coupon is fixed at 3%, but the market now demands 5% — the price must fall to make the total return competitive.
Use this calculator when evaluating individual bond purchases, comparing bond offerings, or analyzing the impact of rate changes on bond holdings. The calculator handles the math you'd otherwise need a financial calculator (Excel, HP 12C) for.
For individual investors, the primary use case is screening bonds on brokerage platforms. Most brokers show bond yields prominently — knowing how to interpret current yield vs YTM lets you make sense of the listings. Look for: (1) YTM appropriate for the bond's credit quality and term, (2) liquidity (some bonds are thinly traded, with wide bid-ask spreads), and (3) call provisions (bonds may be redeemed early at the issuer's option, capping the YTM).
Pair this with the present-value calculator (since bond pricing is just PV of cash flows), the future-value calculator (to compare bond returns against alternatives), and the compound-interest calculator (for the math of reinvested coupons).
A note on credit risk: this calculator assumes the bond is held to maturity and the issuer pays in full. For Treasury bonds, the assumption is essentially safe. For municipal and corporate bonds, default risk is real — even at the AAA level there's some chance of default; high-yield ("junk") bonds have meaningfully higher default rates. The YTM compensates for credit risk in part — a higher YTM relative to Treasuries of similar maturity reflects the market's assessment of credit risk.
For most retail investors, individual bond purchases are challenging because of the bid-ask spread (especially on small lots). Bond mutual funds and ETFs spread that cost across thousands of investors and provide instant diversification. Most planners recommend bond funds over individual bonds unless the investor has substantial holdings and the time to manage them properly.
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Current Yield
5.26%
Yield to Maturity
5.72%
Annual Coupon
$50.00
Total Return
$550.00
Trading at discount