Where a bond's value actually sits calculator
Coupons against principal, off a zero curve.
Interactive: where a bond's value actually sitsMedium
Priced off a zero curve rather than a single yield, and split into its coupon strips and its principal strip. The share sitting in the principal is what makes a bond behave like a long-dated instrument or a short one.
- PV of the coupons
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- PV of the principal
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- Total price
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- Weighted average life
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- Discount factor on the principal
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- Reading
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Set the coupon to zero and everything moves into the principal, the weighted average life equals the maturity, and duration is maximal. Raise the coupon and value shifts forward in time, shortening the duration — which is the mechanical reason a high-coupon bond is less rate-sensitive than a low-coupon one of the same maturity.
The idea behind it
This calculator belongs to Valuation & Cost of Capital, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.
Instruments it applies to
- Zero-Coupon Bond — No coupons, one payment: buy at a discount, collect face value at maturity. The purest interest-rate instrument.
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