1. What is Bond Issue Price?

The bond issue price is the present value of all future cash flows from the bond, discounted at the market yield to maturity. It represents the fair market price at which a bond should be issued based on current market conditions.

2. How Does the Calculator Work?

The calculator uses the bond pricing formula:

Where:

• \( C \) — Periodic coupon payment = (coupon rate × F) / m
• \( r \) — Periodic yield to maturity = yield / m
• \( t \) — Period number
• \( F \) — Face value
• \( n \) — Total number of periods = years × m
• \( m \) — Payments per year

Explanation: The formula calculates the present value of all future coupon payments plus the present value of the face value repaid at maturity.

3. Importance of Bond Pricing

Details: Accurate bond pricing is essential for issuers to determine appropriate offering prices and for investors to make informed investment decisions. It reflects the time value of money and market risk assessment.

4. Using the Calculator

Tips: Enter face value in currency units, coupon rate and yield as decimals (e.g., 0.05 for 5%), years to maturity, and select payment frequency. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between coupon rate and yield?
A: Coupon rate is the fixed interest rate stated on the bond, while yield reflects current market interest rates and represents the actual return investors demand.

Q2: When is a bond issued at par, premium, or discount?
A: Par when coupon rate = yield, premium when coupon rate > yield, discount when coupon rate < yield.

Q3: How does payment frequency affect the price?
A: More frequent payments increase the bond's price slightly due to earlier receipt of cash flows.

Q4: What assumptions does this calculation make?
A: It assumes constant yield to maturity, no default risk, and regular coupon payments.

Q5: Can this be used for zero-coupon bonds?
A: Yes, set coupon rate to 0 and the formula simplifies to present value of face value only.