Bond Price Calculator
Calculate a bond's fair price based on its face value, coupon rate, time to maturity, and current market interest rate.
Why bond prices move opposite to interest rates
A bond's fixed coupon rate is set when it's issued, but market interest rates move over time. When market rates rise above a bond's coupon rate, the bond becomes less attractive relative to newer bonds paying more, so its price falls below face value (trading 'at a discount') to compensate buyers. When market rates fall below the coupon rate, the bond becomes more attractive and trades above face value ('at a premium').
This inverse relationship is one of the most fundamental concepts in bond investing — it's why bond prices and interest rates are often described as moving in opposite directions.
What this price represents
This calculator computes fair value using present value math — discounting all future coupon payments and the final face value repayment back to today's dollars using the current market rate. This is the standard approach used throughout fixed-income valuation.
Real-world bond prices can differ slightly from this theoretical fair value due to factors like credit risk (perceived risk of default), liquidity, and specific market supply and demand — this calculator provides the baseline valuation these real-world factors adjust from.
Frequently asked questions
Why would a bond trade below its face value?
When current market interest rates are higher than the bond's fixed coupon rate, the bond becomes less attractive compared to newer bonds, so its price falls below face value to compensate buyers with a better effective return.
What happens to a bond's price at maturity?
A bond's price converges to its face value as it approaches maturity, since at maturity the holder receives exactly the face value back — any premium or discount gradually shrinks to zero over the bond's remaining life.