Bond Price

Bonds & Fixed Income
Updated Apr 2026 • Has calculator

The present value of a bond's future coupon payments and par repayment, discounted at the required yield.

What is Bond Price?

A bond's price equals the sum of the present values of all its future cash flows — periodic coupon payments plus the face value returned at maturity — discounted at the prevailing yield to maturity. Because the coupon is fixed, the bond price moves inversely with interest rates: when yields rise, prices fall, and when yields fall, prices rise. A bond priced at par means the YTM equals the coupon rate. Bonds priced below par (discount bonds) have a YTM above the coupon rate; bonds above par (premium bonds) have a YTM below the coupon rate. This inverse relationship is the fundamental rule of fixed-income investing.

Formula

Price = Σ [Coupon / (1 + YTM/freq)ᵗ] + FaceValue / (1 + YTM/freq)ⁿ

Worked Example

Worked example — US Treasury 4.000% Note due November 2034

October 2024, YTM = 4.30%

Step 1  Coupon: $40/yr (4.00% on $1,000 face) | Semi-annual: $20
Step 2  YTM: 4.30% | Years to maturity: 10 | Face: $1,000
Step 3  Price = Σ $20/(1.0215)^t + $1000/(1.0215)^20
Step 4  Price ≈ $976.45
Step 5  → Bond trades at a discount: YTM (4.30%) > coupon rate (4.00%)

Source: US Department of the Treasury — Daily Yield Curve Rates (2024-10-01)

Calculate Bond Price

Total annual coupon in dollars (face × coupon rate)

Par value repaid at maturity

Market yield used to discount cash flows

Remaining years until maturity

1 = annual, 2 = semi-annual, 4 = quarterly

Bond Price

—

Not investment advice.

How to Interpret Bond Price

< 900
Deep discount (< 90 cents on the dollar) — significant credit or rate risk
900 – 980
Discount bond (90–98) — YTM above coupon rate
980 – 1020
Near par (98–102) — YTM close to coupon rate
> 1020
Premium bond (> 102) — YTM below coupon rate

📚 Bond Basics — Complete the path

  1. Bond Price
  2. Coupon Payment
  3. Yield to Maturity
  4. Yield to Call
  5. Bond Equivalent Yield
Sources
  1. CFA Institute — Fixed Income Analysis, 3rd ed., Ch. 3
  2. US Department of the Treasury — Daily Yield Curve Rates
  3. Investopedia — Bond Valuation