Bond Return Calculator
Work out what a bond really earns — its income return today (current yield) and its total return if held to maturity (yield to maturity).
Current yield versus yield to maturity
A bond’s return has two parts. The annual coupon is the fixed interest it pays. Current yield expresses that income against the price you actually pay, and yield to maturity (YTM) estimates your total annualised return if you hold the bond to the end, including the gain or loss between your purchase price and the face value you receive at maturity.
If you buy below face value, your YTM is higher than the coupon rate; buy above face value and it is lower.
The formula
Annual coupon = face value × coupon rate. Current yield = annual coupon ÷ purchase price. Approximate YTM = (annual coupon + (face − price) ÷ years) ÷ ((face + price) ÷ 2).
Worked example
| Item | Value |
|---|---|
| Face value | $1,000 |
| Coupon rate | 5% |
| Purchase price | $950 |
| Years to maturity | 5 |
| Current yield | 5.26% |
| Approx. YTM | 6.15% |
Frequently asked questions
What is the difference between current yield and YTM?
Current yield is your income return at today’s price. Yield to maturity also factors in the gain or loss to face value at maturity, giving a fuller picture of total return.
Why is my YTM higher than the coupon?
Because you bought the bond below its face value, so you also make a capital gain when it matures, which lifts your overall return.
Is this an exact YTM?
It is a standard approximation. A precise YTM requires solving for the exact discount rate, but this estimate is close for most bonds.