1. What is Treasury Bond Yield?

The Treasury bond yield represents the return an investor will receive by holding the bond to maturity. For bonds at par, the yield equals the coupon rate. For bonds not at par, yield to maturity (YTM) must be calculated, considering both coupon payments and the difference between purchase price and face value.

2. How Does the Calculator Work?

The calculator uses the following approach:

Where YTM is calculated using an iterative approximation method that solves:

Where:

• \( C \) — Annual coupon payment
• \( F \) — Face value
• \( T \) — Years to maturity
• \( YTM \) — Yield to maturity (decimal)

3. Importance of Yield Calculation

Details: Yield calculation is essential for comparing bond investments, assessing risk-return tradeoffs, and making informed investment decisions in fixed-income markets.

4. Using the Calculator

Tips: Enter the bond's face value (typically $1000), current market price, annual coupon rate (as percentage), and years remaining until maturity. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between coupon rate and yield?
A: Coupon rate is fixed and based on face value, while yield varies with market price and reflects total return including price differences.

Q2: Why does yield increase when price decreases?
A: Yield represents return on investment. A lower price means you pay less for the same future cash flows, resulting in higher effective return.

Q3: What does "at par" mean?
A: When a bond's market price equals its face value. In this case, yield equals coupon rate.

Q4: How accurate is this calculator?
A: It provides a good approximation for annual coupon bonds. For exact YTM calculation, more complex methods may be needed.

Q5: Does this account for semi-annual coupons?
A: This version assumes annual coupons. For semi-annual bonds, adjustments would be needed to the calculation.