What is the difference between coupon rate and market yield?

The coupon rate is fixed at issuance and determines the dollar amount of each interest payment. The market yield (also called yield to maturity or required return) is the rate investors currently demand for bonds of similar risk. When these two rates differ, the bond's market price diverges from its face value.

Why does the bond price fall when interest rates rise?

Bond cash flows are fixed. When the discount rate (market yield) increases, those fixed cash flows are worth less in present-value terms, so the price drops. This inverse relationship is a fundamental principle of fixed-income investing.

What does it mean for a bond to trade at a premium or discount?

A bond trades at a premium when its price is above the face value, which happens when the coupon rate exceeds the market yield. It trades at a discount when its price is below face value, meaning the coupon rate is lower than the market yield.

How does coupon frequency affect the price?

Semi-annual bonds pay half the annual coupon every six months. Because payments arrive sooner (more frequent compounding), they are discounted slightly differently than annual bonds. The calculator adjusts the per-period coupon and yield automatically based on the frequency you choose.

What is the par value component in the breakdown?

The par value component shows the present value of the face value you will receive at maturity, discounted back at the market yield. Together with the present value of all coupon payments, it sums to the full bond price.

Bond Price Calculator

Name: Bond Price Calculator
Availability: InStock
Author: Nham Vu

Enter the face value, coupon rate, market yield, and number of periods to instantly calculate the fair price of a bond.

Bond Parameters

Face Value ($)

Annual Coupon Rate (%)

Annual Market Yield / YTM (%)

Years to Maturity

Coupon Frequency

Fill in the parameters and click Calculate to see the bond price.

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Summary

Enter the face value, coupon rate, market yield, and number of periods to instantly calculate the fair price of a bond.

How it works

Enter the bond's face (par) value — typically $1,000.
Enter the annual coupon rate (the interest rate printed on the bond).
Enter the annual market yield (required rate of return).
Set the number of years to maturity and the coupon frequency.
The calculator discounts each coupon payment and the face value back to today using the market yield.
Read the resulting bond price, premium or discount status, and the breakdown of PV components.

Use cases

Valuing a corporate or government bond before purchasing it.
Comparing the fair price of bonds with different coupon rates.
Understanding how rising or falling interest rates affect bond prices.
Checking whether a bond is trading at a premium or a discount.
Finance coursework and fixed-income exam preparation.
Estimating the impact of yield changes on a bond portfolio.

Frequently Asked Questions

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Last updated: 2026-05-23 · Reviewed by Nham Vu