1. What is Bond Return?

Bond return measures the total gain or loss from a bond investment, including coupon payments and capital gains/losses. It represents the overall profitability of holding a bond until maturity.

2. How Does the Calculator Work?

The calculator uses the bond return formula:

Where:

• \( C \) — Total coupons received (GBP)
• \( F \) — Face value of the bond (GBP)
• \( P \) — Purchase price of the bond (GBP)

Explanation: The formula calculates the total return as a decimal by summing coupon payments and capital gain/loss, then dividing by the purchase price.

3. Importance of Bond Return Calculation

Details: Calculating bond return helps investors compare different bond investments, assess profitability, and make informed investment decisions in the UK bond market.

4. Using the Calculator

Tips: Enter all values in GBP. Coupons should represent total payments received. Purchase price must be greater than zero. The result shows both decimal and percentage formats.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between yield and return?
A: Yield typically refers to current income (coupon/price), while return includes both income and capital gains/losses over the holding period.

Q2: Does this calculator account for time value of money?
A: No, this calculates simple total return. For annualized returns, additional time-based calculations would be needed.

Q3: What if the bond is sold before maturity?
A: Replace face value (F) with the actual sale price to calculate the return for the holding period.

Q4: Are coupon payments assumed to be reinvested?
A: This calculation does not assume reinvestment of coupons, providing a simple return measure.

Q5: How does this apply to UK gilts?
A: The formula works for all bonds including UK government gilts, corporate bonds, and other fixed-income securities.