1. What is Bond Price Calculation?

The bond price calculation determines the present value of all future cash flows from a bond (coupon payments and face value) discounted at the required rate of return. It's fundamental for bond valuation and investment analysis.

2. How Does the Calculator Work?

The calculator uses the bond pricing formula:

Where:

• \( C \) — Coupon payment (USD)
• \( r \) — Discount rate (as decimal)
• \( t \) — Period number
• \( F \) — Face value (USD)
• \( n \) — Total number of periods

Explanation: The formula discounts each future cash flow back to present value and sums them to determine the bond's fair price.

3. Importance of Bond Pricing

Details: Accurate bond pricing is essential for investors to determine fair value, assess yields, and make informed investment decisions in fixed income markets.

4. Using the Calculator

Tips: Enter coupon payment in USD, discount rate as percentage, number of periods, face value in USD, and total periods. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between coupon rate and discount rate?
A: Coupon rate is fixed and determines the periodic payment amount, while discount rate reflects current market interest rates and risk.

Q2: Why does bond price change when interest rates change?
A: Bond prices inversely relate to interest rates - when rates rise, existing bonds' fixed coupons become less attractive, lowering their price.

Q3: What happens when bond price equals face value?
A: The bond trades at par, meaning its yield to maturity equals its coupon rate.

Q4: How does time to maturity affect bond price?
A: Longer maturities make bonds more sensitive to interest rate changes, creating greater price volatility.

Q5: Can this calculator be used for zero-coupon bonds?
A: Yes, by setting coupon payment to 0, it will calculate the discounted face value only.