A bond's price is its remaining coupons and face value, discounted at the yield buyers demand today. When that yield tops the coupon rate, you pay less than face value. When it's lower, you pay more.
The calculator does that discounting for you. It prices the bond on a coupon date and assumes every payment arrives on time.
What the calculator adds up
C is one coupon payment and F the face value. The rate r is the market yield divided by coupons per year, and n is the number of coupons left.
The first part values the coupons; the second, the face value repaid at maturity. The chart under the result shows that split. With semi-annual coupons, a 5% yield becomes 2.5% per half-year, and 10 years become 20 periods.
Why the SEC's 3% bond fell to $925
The SEC illustrates interest rate risk with a 10-year, $1,000 bond paying a 3% coupon. A year later, market rates rise to 4%, and its price drops to $925. Here's that bond in the calculator, plus the opposite case:
| Scenario | Years left | Market yield | Price |
|---|---|---|---|
| New bond, rates at 3% | 10 yr | 3% | $1,000.00 |
| A year later, rates up to 4% | 9 yr | 4% | $925.04 |
| A year later, rates down to 2% | 9 yr | 2% | $1,081.99 |
With nine years left at 4%, the calculator gives $925.04, the SEC's figure to the dollar. New bonds now pay 4%, so the old 3% bond has to get cheaper. Its price falls until its yield to maturity reaches 4%.
If rates fall to 2% instead, the same bond is worth $1,081.99. FINRA calls the $81.99 above face value a premium, and a shortfall below face a discount. A market yield above the coupon rate means a discount; below it, a premium. Equal means par, exactly $1,000.
How far the price moves when rates move
The longer a bond's maturity, the SEC notes, the more changing rates can affect its value before it matures. Here's a 5% coupon bond with 2, 10 or 30 years left. At a 5% yield, each is worth exactly $100 per $100 of face value. Now move rates one point either way:
| Years left | Market yield | Price per $100 of face |
|---|---|---|
| 2 yr | 4% | $101.90 |
| 2 yr | 6% | $98.14 |
| 10 yr | 4% | $108.18 |
| 10 yr | 6% | $92.56 |
| 30 yr | 4% | $117.38 |
| 30 yr | 6% | $86.16 |
Each price doubles as a percentage of face, so the moves read straight off the table. The 2-year bond moves less than 2% either way. The 30-year bond gains 17.38% when rates fall but loses 13.84% when they rise.
FINRA's shortcut for this is duration. A bond with a duration of 10 should lose about 10% if rates rise one percentage point. The effective duration calculator estimates it from three prices:
So the 10-year bond should move about 7.8% per point, between its actual 7.44% loss and 8.18% gain. Per FINRA, duration generally rises with maturity and falls as the coupon rises.
The price drifts back to face value
Prices move even when rates don't. Suppose yields stay at 4% for the rest of the SEC bond's life. Its price then climbs toward $1,000:
| Years left | Price at a 4% yield |
|---|---|
| 9 yr | $925.04 |
| 6 yr | $947.12 |
| 3 yr | $971.99 |
| 1 yr | $990.29 |
That climb from $925.04 is part of what a buyer earns. Add the coupons, and the return comes to the 4% yield you priced it at. A premium bond, like the $1,081.99 case above, slides down toward $1,000 instead.
If you hold to maturity, the SEC notes, price swings along the way may matter less. You're still paid the stated interest and the face value. Callable bonds are the exception: FINRA says they're common and may be redeemed early when rates fall.
The price you'll actually pay
In a real trade, the price is shown differently and often costs more:
- Quotes in points. FINRA explains that bond prices are usually quoted as a percentage of par. A $1,000 bond at par trades at 100, and a quote of 95 means $950. The SEC's bond would show at about 92.5.
- Accrued interest. Between coupon dates, the buyer pays the seller the interest that has built up since the last coupon. FINRA says it's generally added to the contract price. On the SEC's 3% bond, halfway to the next coupon, that's roughly $7.50, half of one $15 payment. The calculator rounds the term to whole coupon periods, so its price never includes accrued interest.
- Markups. A firm selling you a bond as principal may mark up the price, FINRA notes; the markup is its compensation. Acting as your agent, it may charge a commission instead, shown on your confirmation.
Which market yield should you enter?
Enter what bonds like yours yield today: same time to maturity, similar credit risk. For a Treasury, the Federal Reserve's H.15 release lists daily yields by maturity. On September 24, 2026, it showed 4.87% for 2 years, 5.18% for 10 and 5.47% for 30.
Most other bonds carry credit risk, FINRA notes, while Treasuries are generally deemed free of default risk. The gap between a bond's yield and a Treasury's of the same maturity is what FINRA calls a credit spread. So for a corporate bond, start from the Treasury yield and add the spread on similar bonds. Credit risk reaches the price only through the yield you enter.
Know the price but not the yield? The bond YTM calculator solves the equation for it, and the bond yield calculator gives the simpler current yield.
Sources
- SEC, Investor.gov: Investor Bulletin: Fixed Income Investments – When Interest Rates Go Up, Prices of Fixed-Rate Bonds Fall (June 26, 2013)
- FINRA, Bonds (accessed September 26, 2026)
- FINRA, Brush Up on Bonds: Interest Rate Changes and Duration (September 19, 2024)
- FINRA, Spread the Word: What You Need to Know About Bond Spreads (May 8, 2024)
- Federal Reserve Board, H.15 Selected Interest Rates (September 25, 2026)