Bond Calculator – Find Out How Much Your Bond is WorthOctober 25th, 2012 by David Waring
Us the bond calculator to find out how much your bond is worth, as well as how its value will change as interest rates change.
How do you use the bond calculator?
You’ll need to put in the following information so that the bond calculator can then display a figure for the market value of a given bond:
Bond Face Value: Enter here the amount of money you will receive on the bond’s maturity date.
Months Until Maturity: Put the number of months until the bond matures in this section of the bond calculator.
Coupon Rate: Enter the coupon rate (interest rate) of the bond here. For example, for a 5% coupon rate, enter 5.
Current Market Rate (Discount Rate) (%): There is no one defining rate for the market; however, the most closely viewed and easiest to find rate is the one for US Treasury bonds. Let’s say that you own a 10 year corporate bond with a yield that is 200 basis points (2%) above the yield of a Treasury bond of the same duration. By changing the value here (Current Market Rate), you can simulate a change in the interest rates for Treasury bonds (say, from 3% to 4%) and then see what the impact would be on your corporate bond.
Market Value Of Bond: When you’ve entered in the data above into the bond calculator and clicked on “Calculate”, this is the result. Change the figure for “Current Market Rate” as indicated above, to see how the market value of your bond might then be affected.
What are the limitations of the Bond Calculator?
Although most bonds are tradeable, their price is ultimately determined by the market, rather than by a calculator. The results given by the Bond Price Calculator can only be indicative of what might happen if market interest rates change. The calculator does not take into account other factors which can significantly affect the value of a bond such as a credit downgrade.