Bond Valuation Calculator

The size of the U.S. municipal bond market, or the total amount of debt outstanding, at the end of 2018, according to the Securities Industry and Financial Markets Association (SIFMA), an industry group.

A bond's face or par value will often differ from its market value. This has to do with several factors including changes to interest rates, a company's credit rating, time to maturity, whether there are any call provisions or other embedded options, and if the bond is secured or unsecured. A bond will always mature at its face value when the principal originally loaned is returned.

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A bond that pays a fixed coupon will see its price vary inversely with interest rates. This is because receiving a fixed interest rate, of say 5% is not very attractive if prevailing interest rates are 6%, and become even less desirable if rates can earn 7%. In order for that bond paying 5% to become equivalent to a new bond paying 7%, it must trade at a discounted price. Likewise, if interest rates drop to 4% or 3%, that 5% coupon becomes quite attractive and so that bond will trade at a premium to newly-issued bonds that offer a lower coupon.

Bond valuation looks at discounted cash flows at their net present value if held to maturity. Duration instead measures a bond's price sensitivity to a 1% change in interest rates. Longer-term bonds have a higher duration, all else equal. Longer-term bonds will also have a larger number of future cash flows to discount, and so a change to the discount rate will have a greater impact on the NPV of longer-maturity bonds as well.

A convertible bond is a debt instrument that has an embedded option that allows investors to convert the bonds into shares of the company's common stock. Convertible bond valuations take a multitude of factors into account, including the variance in underlying stock price, the conversion ratio, and interest rates that could affect the stocks that such bonds might eventually become. At its most basic, the convertible is priced as the sum of the straight bond and the value of the embedded option to convert.

Beware of internet scams with a picture of this site claiming that you can enter your birth certificate number to access bonds owed to you. Those claims are false, and attempts to defraud the government can be prosecuted. See -certificate-bonds.htm.

Payment interval is Annual, Semiannual, Quarterly or Monthly. The calculator adjusts the payment value, discount rate and number of payments to reflect the selected payment interval. For example, assume a semiannual payment interval is applied to the default values on the form. The adjusted payment is $200, the adjusted discount rate is 2% and the number of payments is 20.

With this bond price calculator, we aim to help you calculate the bond price issued by a government or a corporation. Finding out the current bond price is one of the most critical procedures for bond investors, as miscalculating can lead to huge losses. But worry not. This calculator is built to make the process easier for you.

We have written this article to help you understand what a bond price is and how to price a bond using the bond price formula. We will also demonstrate some examples to help you understand the concept.

Before we dive into calculating the current bond price with our bond valuation calculator, let's take some time to talk about what a bond is. A bond is one of the most prevalent fixed-income securities. When an entity issues bonds, it is considered as acquiring funding from investors through issuing debt. The bond market may not be as famous as the stock market, but believe it or not, the global bond market is more than double the stock market.

When you purchase a bond from the bond issuer, you are essentially making a loan to the bond issuer. As the bond price is the amount of money investors pay for acquiring the bond, it is one of the most important, if not the most important, metrics in valuing the bond.

Bond price is calculated as the present value of the cash flow generated by the bond, namely the coupon payment throughout the life of the bond and the principal payment, or the balloon payment, at the end of the bond's life. You can see how it changes over time in the bond price chart in our calculator.

Bond prices are massively affected by the macroeconomic environment, especially interest rates. When the central banks, such as the Federal Reserve and the Bank of England, change their interest rate policies, the bond prices fluctuate. Specifically, the bond price increases when the interest rates go down and vice versa.

Bond prices can be either higher than or lower than their face value. This depends on the coupon rates and the risks of the bond. The higher the coupon rate, the higher the price, holding all else constant. The higher the risks of the bond, the lower the price, holding all else constant.

Corporate bonds tend to be riskier than otherwise similar government bonds. This is because corporate bonds are associated with credit risks since they can default. Most government bonds are less sensitive to credit risks as most of them can print more money to repay their debt.

A bond is a debt security, usually issued by a government or a corporation, sold to investors. The investors will lend the money to the bond issuer by buying the bond. The investors will get the returns by receiving coupons throughout the life of the bond and the face value when the bond matures.

A coupon is the interest payment of a bond. Typically, it is distributed annually or semi-annually depending on the bond. It is normally calculated as the product of the coupon rate and the face value of the bond.

The face value of a bond can also be called the principal. It is the amount of money the bond investor will receive at the maturity date if the bond issuer does not default. It is the last payment a bond investor will receive if the bond is held to maturity.

Find out what your paper savings bonds are worth! The calculator will price Series EE, Series E, and Series I savings bonds, and Savings Notes. This calculator is for paper savings bonds only. For electronic savings bonds, log into TreasuryDirect.

To use an inventory you created previously, open the inventory and click whichever one of these buttons you see: "Return to Savings Bond Calculator" or "Update." This automatically updates the values of the bonds in the inventory and enables you to add bonds to the inventory.

Beware of internet scams with a picture of this page claiming you can enter your birth certificate number to access bonds owed to you. Those claims are false, and attempts to defraud the government can be prosecuted. See Birth Certificate Bonds.

Bond Price Field - The Price of the bond is calculated or entered in this field. Enter amount in negative value.Face Value Field - The Face Value or Principal of the bond is calculated or entered in this field.Annual Coupon Payment Field - The Annual Coupon Payment is calculated or entered in this field.Annual Yield% Field - The Annual Bond yield is calculated or entered in this field.Years to Maturity Field - The number of years remaining util maturity is calculated or entered in this field. Compounding Field - The value selected in this dropdown represents the Compounding Frequency of the Annual Interest Rate. For Annuities, it also represents the Frequency of the Annuity Payments.

To know whether a particular bond is a good investment, a financial institution, analyst, or individual investor must be able to calculate the fair value of the bond in question. Without this understanding, making an intelligent investment decision would be next to impossible.

Companies, municipalities, states, and sovereign governments issue bonds in order to raise capital and finance a variety of projects, activities, and initiatives. For companies, bond issuance offers an alternative to stock issuance, which can impact company value.

Investors, on the other hand, purchase bonds because of the predictable and stable income they offer compared to other investment vehicles, like stocks. If a bond is held until it matures, the bondholder will have earned back their entire principal, making bonds a way for investors to preserve capital while earning a profit.

It means that the company or country that owes the bond will pay the bondholder three percent of the face value of $1,000 ($30) every year for 30 years, at which point they will pay the bondholder the full $1,000 face value.

Represented in the formula are the cash flow and number of years for each of them (called "t" in the above equation). You would then need to calculate the "r," which is the interest rate. Which should you use? You could use the current interest rate for similar 30-year bonds today, but for the sake of this example, plug in five percent.

Now that you have your price, you can play with some of the assumptions to see how things change. What if the prevailing market interest rate were four percent instead of five percent? In that case, the bond price would be $827.08. If it were six percent instead of five percent, the price would be $587.06.

This can be important if you don't want to actually own the bond for 30 years. If you want to hold the bond for five years, then you'd receive $30 annually for five years, and then receive that price of the bond at that time, which will depend on the current interest rates. This is why, while some long-term bonds (like government Treasury bonds) can be considered "risk-free" over their full lifetime, they will often vary a great deal in value on a year-to-year basis.

Though the process outlined above may seem confusing and overwhelming, it's a crucial part of determining whether a bond is a sound investment opportunity. As with many other skills, given enough practice and background, pricing a bond will become second nature for individuals in a finance-focused role. 9af72c28ce