Current Yield
5.26%
YTM
5.64%
Annual Interest
$500
Current Yield = (Annual Interest Payment / Purchase Price) × 100%. Yield to Maturity considers both interest payments and the difference between purchase price and face value at maturity.
Current yield only considers annual interest payments relative to purchase price. Yield to Maturity (YTM) accounts for both interest payments and capital gains/losses if held to maturity, providing a more complete picture.
| Metric | What It Measures | When to Use |
|---|---|---|
| Current Yield | Annual income vs price paid | Comparing income between bonds |
| Yield to Maturity | Total return if held to maturity | Comparing overall investment return |
| Yield to Call | Return if called early | Callable bonds with call dates |
Bond yields vary by type and risk. Treasury bonds: 3-5%, Corporate bonds: 4-7%, High-yield bonds: 6-10%. Higher yields typically indicate higher risk. Compare yields to inflation and other investment options.
| Bond Type | Typical Yield | Risk Level |
|---|---|---|
| US Treasury | 3.5–4.5% | Very low (government-backed) |
| Investment Grade Corporate | 4.5–6.5% | Low to moderate |
| High-Yield Corporate | 6.5–10%+ | Moderate to high |
| Municipal | 3–5% (tax-free) | Low |
Bonds purchased below face value (discount) offer higher yields and potential capital gains at maturity. Bonds purchased above face value (premium) offer lower yields but may have higher coupon rates. Consider your investment goals and risk tolerance.
Inputs
Result
A $10,000 face value bond with a 5% coupon pays $500/year in interest. Purchased at a discount for $9,500, the current yield is $500/$9,500 = 5.26%. The yield to maturity is higher at 5.79% because you also gain $500 ($10,000 - $9,500) when the bond matures, adding $50/year to average returns.
Inputs
Result
This $5,000 bond with a 4% coupon pays $200/year. Bought at $4,800, the current yield is $200/$4,800 = 4.17%. The YTM is 5.00% because you also receive $200 capital gain at maturity ($40/year average), for a total return of $1,200 over the 5-year term.
Current Yield = (Annual Interest / Purchase Price) x 100Measures the annual income return based on the price paid for the bond.
Where:
Annual Interest= Face Value x (Coupon Rate / 100)Purchase Price= The price paid to buy the bondYTM = ((Annual Interest + (Face Value - Purchase Price) / Years) / Purchase Price) x 100An approximation of the total annual return if the bond is held to maturity, including both coupon payments and capital gain or loss.
Where:
YTM= Yield to maturity percentageAnnual Interest= Yearly coupon payment (Face Value x Coupon Rate)Face Value= Par value of the bond (received at maturity)Purchase Price= Price paid for the bondYears= Years until maturityA $10,000 face value bond with a 5% coupon rate pays $500 in annual interest regardless of the market price. If purchased at par ($10,000), the current yield equals the coupon rate at 5.00%. But bonds rarely trade at par — when purchased at a $9,500 discount, the current yield rises to $500 / $9,500 = 5.26% because you pay less for the same $500 income stream.
Yield to maturity (YTM) captures the complete return picture by adding the capital gain or loss at maturity. That $9,500 purchase price on a $10,000 face value bond adds $500 in capital gain spread over the remaining term. With 10 years to maturity, the $50/year capital gain pushes the YTM to approximately 5.79% — 53 basis points above the current yield. Conversely, a bond purchased at a $10,500 premium loses $500 at maturity, lowering YTM below the current yield.
The relationship between price and yield is inverse: when bond prices fall 10%, yields rise proportionally. This mechanism explains why rising interest rates cause existing bond prices to drop — new issues offer higher coupons, making older bonds less attractive until their price adjusts to deliver a competitive yield.
The 10-Year U.S. Treasury yielded 4.0–4.5% through 2024–2025, serving as the baseline risk-free rate against which all other bonds are measured. Investment-grade corporate bonds (rated AAA through BBB) typically pay 50–200 basis points above Treasuries, translating to 4.5–6.5% yields. High-yield or “junk” bonds (rated BB and below) compensate for higher default risk with yields of 6.5–10% or more.
Municipal bonds offer yields of 3–5% but carry a significant hidden advantage: interest is exempt from federal income tax and often state tax as well. A 4% municipal bond provides an effective yield of 5.6% for an investor in the 28% federal bracket (4% / (1 – 0.28) = 5.56%). This makes munis particularly attractive for high-income earners seeking tax-efficient fixed income.
Real yield — nominal yield minus inflation — is what actually grows your purchasing power. With inflation averaging approximately 3% in 2024–2025, a 5% Treasury bond delivers only 2% real return. Treasury Inflation-Protected Securities (TIPS) guarantee a real yield above CPI, making them a hedge against unexpected inflation spikes.
| Bond Type | Typical Yield | Risk Level | Tax Treatment |
|---|---|---|---|
| U.S. Treasury | 3.5–4.5% | Very low | Federal tax; state exempt |
| Investment Grade Corporate | 4.5–6.5% | Low–moderate | Fully taxable |
| High-Yield Corporate | 6.5–10%+ | Moderate–high | Fully taxable |
| Municipal | 3–5% | Low | Federal + often state exempt |
| TIPS | 1.5–2.5% real | Very low | Federal tax on inflation adjustment |
Discount bonds trade below face value, offering both coupon income and a capital gain at maturity. A $10,000 bond purchased at $9,200 with an 8-year maturity delivers a $100/year capital gain ($800 / 8) on top of the coupon. For a 5% coupon bond, that transforms a 5.43% current yield into approximately 6.52% YTM — a meaningful difference for income-focused investors.
Premium bonds carry above-market coupon rates but lose value at maturity. Buying a $10,000 bond at $10,800 with a 6% coupon means you collect $600/year in interest but lose $800 at maturity over, say, 10 years ($80/year capital loss). The current yield of 5.56% ($600 / $10,800) drops to a YTM near 4.80% once the capital loss is factored in.
Zero-coupon bonds represent the most extreme discount: they pay no periodic interest and sell at deep discounts. A 10-year zero-coupon bond with $10,000 face value might sell for $6,139, delivering a 5.00% YTM entirely from capital appreciation. These are ideal for specific future obligations like college tuition because the final payout is known with certainty.
Tip: In a rising rate environment, existing bonds trade at discounts. This creates buying opportunities for investors willing to hold to maturity, locking in higher YTMs than new-issue coupon rates suggest.
Enter four inputs to calculate both current yield and yield to maturity: face value (the par amount you receive at maturity), purchase price (what you actually paid), annual coupon rate (the stated interest rate), and years to maturity (remaining time until the bond matures). The calculator displays current yield, YTM, annual interest, total interest, and total return immediately.
Compare multiple bonds by running separate calculations. A $10,000 Treasury at $9,800 with a 4.25% coupon and 7 years to maturity produces a different risk-adjusted return than a $10,000 corporate bond at $9,500 with a 5.5% coupon and 10 years. Side-by-side comparison helps determine which bond offers better value for your risk tolerance and investment horizon.
Enter face value
Most bonds have a $1,000 or $10,000 face value. This is the amount the issuer pays you at maturity.
Enter purchase price
The actual amount you paid or plan to pay. Below face value = discount bond; above = premium bond.
Set coupon rate
The annual interest rate printed on the bond. A 5% coupon on $10,000 face value pays $500/year.
Set years to maturity
Remaining years until the bond matures and you receive the face value. Longer maturities amplify the YTM/current yield gap.
Compare current yield and YTM
YTM is the more complete measure. Use it to compare bonds with different prices, coupons, and maturities on an equal basis.
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Last Updated: Mar 26, 2026
This calculator is provided for informational and educational purposes only. Results are estimates and should not be considered professional financial, medical, legal, or other advice. Always consult a qualified professional before making important decisions. UseCalcPro is not responsible for any actions taken based on calculator results.