$5,000 Bond at 7% Coupon
Based on a 10-year term and a 6% market yield by default. Use the calculator below to adjust any input.
Bond Price
$5,371.94
Trading at a premium to face value
Example
A $5,000 face-value bond paying a 7% coupon rate over 10 years, discounted at a 6% market rate, is priced at approximately $5,371.94 today — trading at a premium to face value, with a current yield of 6.52%.
Coupon Payment
$175.00 / period
Current Yield
6.52%
Total Coupon Income
$3,500
Price Status
Premium
Bond price, split by present-value source
- PV of Coupons: $2,603.56
- PV of Face Value: $2,768.38
What is a Bond?
A bond is a fixed-income instrument that represents a loan made by an investor to a borrower, typically a corporation or government entity. The issuer promises to pay periodic interest (the coupon) and to repay the face value (also called par value) when the bond matures.
A bond's price is the present value of its future coupon payments and the return of principal at maturity, discounted at the current market yield — the return investors demand for bonds of similar risk and maturity. When the market yield rises above the bond's coupon rate, the price falls below face value (a discount); when it falls below the coupon rate, the price rises above face value (a premium).
Present value of each coupon period's cash flow
Period-by-Period Cash Flow Schedule
| Period | Cash Flow | Present Value |
|---|---|---|
| 1 | $175.00 | $169.90 |
| 2 | $175.00 | $164.95 |
| 3 | $175.00 | $160.15 |
| 4 | $175.00 | $155.49 |
| 5 | $175.00 | $150.96 |
| 6 | $175.00 | $146.56 |
| 7 | $175.00 | $142.29 |
| 8 | $175.00 | $138.15 |
| 9 | $175.00 | $134.12 |
| 10 | $175.00 | $130.22 |
| 11 | $175.00 | $126.42 |
| 12 | $175.00 | $122.74 |
| 13 | $175.00 | $119.17 |
| 14 | $175.00 | $115.70 |
| 15 | $175.00 | $112.33 |
| 16 | $175.00 | $109.05 |
| 17 | $175.00 | $105.88 |
| 18 | $175.00 | $102.79 |
| 19 | $175.00 | $99.80 |
| 20 | $5,175.00 | $2,865.27 |
How Is Bond Price Calculated?
Each future coupon payment and the final face-value repayment are discounted back to today's dollars using the market yield, then summed. Coupon payments form an annuity (a series of equal payments), while the face value is a single lump sum received at maturity.
Why Bond Prices Move Opposite to Interest Rates
A bond's coupon rate is fixed at issuance, but market interest rates constantly change. If rates rise after a bond is issued, new bonds offer higher coupons, making the older, lower-coupon bond less attractive — so its price must fall to offer a comparable yield. The reverse happens when rates fall, pushing existing bond prices up.
Coupon Frequency Affects Price Slightly
More frequent coupon payments (monthly or quarterly versus annually) mean investors receive cash sooner, which slightly increases present value at the same nominal rates. This is why the payment frequency field matters even when the annual coupon rate stays the same.
Current Yield vs. Yield to Maturity
Current yield (annual coupon divided by price) is a simple snapshot of income relative to what you'd pay today, but it ignores any gain or loss from the price converging to face value by maturity. Yield to maturity accounts for that full return and is generally the more complete measure for comparing bonds with different prices and maturities.
Example — Your Current Inputs
A $5,000 face-value bond paying a 7% coupon rate over 10 years, discounted at a 6% market rate, is priced at approximately $5,371.94 today — trading at a premium to face value, with a current yield of 6.52%.
Additional Example — A Premium Bond
A $1,000 face-value bond paying a 7% annual coupon, with 5 years left to maturity, priced at a 5% market yield, is worth approximately $1,086.59 — a premium of nearly $87 over face value, because its 7% coupon beats what new bonds of similar risk currently pay.
About These Parameters
- Face Value & Coupon Rate
- Face value is the amount repaid at maturity and the base the coupon rate is applied to. The coupon rate is fixed for the life of the bond and determines the dollar amount of each interest payment regardless of how the bond's market price moves.
- Years to Maturity
- Longer maturities mean more future cash flows to discount, which generally makes a bond's price more sensitive to changes in market yield than a short-term bond with the same coupon.
- Market Yield (Discount Rate)
- This represents the return investors currently require for bonds of comparable risk and maturity. It moves with broader interest rates and credit conditions, and it's the single biggest driver of whether a bond trades above, at, or below face value.
- Coupon Frequency
- How often interest is actually paid out each year. Semiannual payments are standard for most U.S. Treasury and corporate bonds, while some international and municipal bonds pay annually.
Frequently Asked Questions
Why does a bond's price change if the coupon rate is fixed?
The coupon dollar amount never changes, but the price investors are willing to pay for that fixed stream of payments moves inversely with market interest rates, so the bond's effective yield stays competitive with newly issued bonds.
What happens to the price at maturity?
As a bond approaches maturity, its price converges toward face value regardless of premium or discount, since the remaining number of discounted cash flows shrinks toward just the final principal repayment.
Does this calculator account for credit risk?
No — this is a present-value pricing model that assumes the issuer pays every coupon and the face value in full. Real-world bond prices also reflect the issuer's credit quality, liquidity, and call provisions, which this tool does not model.