TeachMeFin

Bond Pricing Visualizer

Explore how bond prices evolve over time

Bond Price Over Time

Par Value
Bond Price

Initial Price

$1,172.92

Annual Coupon

$50.00

Current Yield

4.26%

Price vs Par

17.29%

Present Value Formula

P=
n∑t=1
FV·c
(1 +r)t
+
FV
(1 +r)n

where FV · c = Annual Coupon Payment

Variables

P= Bond Price (what we're calculating)
FV= Face Value (Par Value)
c= Coupon Rate (annual, as decimal)
r= Discount Rate / Yield to Maturity (as decimal)
n= Number of years until maturity

Your Current Values

FV$1,000
c0.0500 (5%)
r0.0400 (4%)
n30 years
FV × c$50.00 / year
P$1,172.92

Understanding the Formula

The bond price is the sum of two present values:

  1. Present Value of Coupon Payments: Each annual coupon is discounted back to today using the discount rate.
  2. Present Value of Face Value: The final principal payment at maturity, discounted back to today.

As time passes, n decreases, causing the bond price to converge toward the face value. This is why all bonds approach par as they near maturity, regardless of whether they started as premium or discount bonds.