1. What is Bond Issue Price?

The issue price of a bond is the price at which a bond is initially sold to investors. It represents the present value of all future cash flows (coupon payments and face value) discounted at the bond's yield to maturity.

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 cash flows, including periodic coupon payments and the final face value payment.

3. Importance of Issue Price Calculation

Details: Accurate issue price calculation is crucial for bond issuers to determine the appropriate offering price and for investors to assess the bond's fair value and potential return.

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 the 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 paid on the bond's face value, while yield is the return investors require based on current market conditions.

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

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

Q4: What factors influence the yield to maturity?
A: Market interest rates, credit risk, inflation expectations, and time to maturity.

Q5: Can this calculator be used for zero-coupon bonds?
A: Yes, set coupon rate to 0, and the issue price will equal the present value of the face value.