How is the fair price of a bond calculated?

A bond's fair price is the present value of all future cash flows (coupon payments + face value at maturity) discounted at your required yield. If your required YTM is higher than the coupon rate, fair price is below face value; if lower, fair price is above face value.

Why does bond price move inversely to yield?

A bond's coupon payments are fixed. When market yields rise (e.g., new bonds offer higher returns), existing bonds with lower coupons become less attractive, so their price drops to make the effective yield match the market. Conversely, falling yields push prices up.

What does "discount" or "premium" mean for a bond?

A bond trading at "discount" is priced below its face value (e.g., Rs. 950 for a Rs. 1,000 face value bond) — this happens when market yields exceed the coupon rate. A bond at "premium" trades above face value, which happens when market yields are below the coupon rate.

How do I use this calculator to negotiate a bond purchase?

Enter the bond's face value, coupon rate, years to maturity, and your target YTM. The calculator outputs the maximum price you should pay to achieve that yield. Compare this against the platform's asking price to assess if the bond is fairly priced.

All Calculators

Bond Price Calculator

Calculate fair price based on desired yield

Face Value (₹)

Desired YTM (%)

Coupon Rate (% p.a.)

Years to Maturity

Coupon Frequency

Bond price is inversely related to yield. Higher desired yield means lower price.