A bond pays fixed coupon interest until maturity, then returns the face value.
About this calculator
A bond pays fixed coupon interest until maturity, then returns the face value. The coupon rate is fixed at issue, but the price you pay on the secondary market moves with interest rates — so the return you actually earn depends on what you pay today.
This bond calculator takes face value, coupon rate, years to maturity and current market price. It returns current yield (annual coupon divided by price) and an approximate yield to maturity (YTM) that accounts for any discount or premium you pay relative to par.
Example: a ₹1 lakh GOI bond at 7.5% coupon bought for ₹95,000 with 5 years left pays ₹7,500/year in coupons. Current yield is 7.89%. Because you also gain ₹5,000 at maturity, approximate YTM rises to about 8.4%. Compare that against an [[fd]] or [[annuity]] before locking in long-term money. If you hold till maturity on a discount bond, total return beats the headline coupon rate.
Common uses
- Comparing a 7.1% RBI floating-rate bond bought at ₹98 vs a 7.5% GOI bond at ₹95 on the NDS-OM platform
- Checking whether a corporate AA+ bond at 9% coupon still beats FD after buying at a premium
- Estimating YTM on 54EC capital-gains bonds before the 6-month investment window closes
- Deciding between holding an existing bond to maturity vs selling at current market price
Frequently asked questions
What is the difference between current yield and YTM on a bond?
Current yield is annual coupon divided by market price — it ignores capital gain or loss at maturity. YTM includes that price change spread over remaining years. On a discount bond, YTM is higher than current yield. On a premium bond, YTM is lower.
How do I calculate YTM on a ₹1 lakh bond at 7.5% bought for ₹95,000?
Annual coupon is ₹7,500. Capital gain is ₹5,000 over 5 years, or ₹1,000/year. YTM ≈ (7,500 + 1,000) ÷ 97,500 = 8.72%. Current yield alone would show 7.89% — the discount adds nearly a full point.
Why does a bond price fall when interest rates rise?
New bonds are issued at higher coupons, so older bonds with lower coupons must drop in price to offer a competitive yield. A 7% bond becomes less attractive when fresh FDs pay 7.5%, pushing its market price below face value.
Are bond coupon payments taxable in India?
Yes. Coupon interest is taxed at your income slab rate. Listed bonds held over 12 months may qualify for 12.5% LTCG on price appreciation, but coupon income is always fully taxable. Factor post-tax yield when comparing against PPF or tax-free instruments.
When should I buy a bond at a discount vs at par?
Discount bonds give higher YTM because you gain at maturity on top of coupons. At par, current yield equals YTM. Premium bonds (above face) mean you lose at maturity, so YTM drops below the coupon — only worth it if you need the specific issuer or liquidity.