Description of the bond calculator
Financial - Examples for the financial calculators
Tuesday, 10 June 2008 05:27

Given the coupon interest and the nominal value of a bond one can use the bond calculator to compute one of the following:

Below a description of each input field of the bond calculator:

Field nameDescription
Nominal interest (%)Coupon rate per year. If the coupon rate is 2% and two coupons are paid per year then enter here "4".
Coupon periode:Time between two coupon payments.
Datum computation:The date the results are computed for.
Maturity date:Date on which the nominal value of the bond is paid.
Interest in advance or afterwards:Almost always coupon payments are at the end of each coupon period, so enter "afterwards" here.
Nominal value:Amount that is paid on the Maturity Date, on top of the last coupon.
Yield to Maturity or value:Choose Value if the value needs to be computed and otherwise choose Yield to Maturity to compute the yield.
Market Value or Yield to Maturity:Enter below the radio buttons the (market) value if the yield needs to be computed or enter the Yield to Maturity if the value needs to be computed.
Add coupon to market value:If checked then the value field above the checkbox refers to the price without the current coupon interest, the clean price. Otherwise the value field refers to the price with the current coupon interest, the dirty price.

The output fields:

Field name Description
Yield to MaturityThe annualized return of the bond as a percentage of its market value. Only visible if the Yield is computed, that is if Yield is selected at field Compute Yield to Maturity or Value.
Value excluding current or last couponValue of the bond corrected with the coupon interest over the current terms, this is also called the Clean Price of the bond.
Value including current or last couponGives the Dirty Price (total value) of the bond.
Coupon interest from the previous date or until the next date:Coupon interest related to the current period. A positive value means that a buyer pays the Clean Price plus the coupon interest over the current period. This is the most common scenario and occurs when coupon payments are at the end of each period. A negative value means that a buyer pays the Clean Price minus the coupon interest over the current period. This occurs when coupon payments are at the beginning of each period.
Modified durationPercentage expressing the interest rate sensitivity of the value of the bond. If the yield to maturity of similar bonds goes up with one percent then the Clean Price of the bond goes down by approximately the Modified Duration percentage.
Present value couponsPresent value of the coupons. The value of the coupons is corrected for the moment in time each coupon is paid using the given or computed yield. This result field is equal to the value of a bond paying only coupons and not paying the nominal value. See also the example perpetual bond.