Simple Interest
Calculate interest earned on bonds that pay simple interest (non-compounding).
Compound Interest
Calculate returns when interest compounds or you reinvest coupon payments.
Yield to Maturity
Calculate the annualized return if you hold a bond until maturity.
Understanding Bond Calculations
Learn about different bond interest calculation methods.
Simple Interest
Simple interest is calculated only on the original principal amount. Most bonds pay simple interest at regular intervals (coupon payments) without compounding.
Formula: I = P × r × t
Compound Interest
Compound interest is calculated on the initial principal and also on the accumulated interest of previous periods. This occurs when you reinvest coupon payments.
Formula: A = P(1 + r/n)nt
Yield to Maturity
YTM is the total return anticipated on a bond if held until it matures. It considers the current market price, par value, coupon rate, and time to maturity.
YTM is calculated through an iterative process as there's no simple formula.
Tax Considerations
Interest from most bonds is taxed as ordinary income. Municipal bonds may be tax-exempt. Capital gains from selling bonds may qualify for lower tax rates.
Always consult a tax professional for your specific situation.