Yield of a coupon bond formula

Tags: bonds pricing and analysis

Description of the Yield of a coupon bond formula

Formula for the calculation of the yield of a coupon bond. The yield $i$ will be the figure which solves the below equation. It is obtained by iteration.

Formula

P_{g} - (\sum_{n = 1}^{N} \frac{c p n_{n}}{(1 + i)^{t_{n}}} + \frac{C_{N}}{(1 + i)^{t_{N}}}) = 0

Symbols

C_{N}

Principal of the bond

c p n_{n}

Nominal coupon of period n

i

Yield

P_{g}

Dirty price

t_{n}

Time between calculation date and the maturity of cash flow n (full years and year fraction)

Additional information related to this formula

Related definitions from the glossary of financial terms

Bond • Clean price • Coupon • Yield

How to Calculate the Price of a Coupon Bond: A Comprehensive Guide • Measuring Interest Rate Risk and Credit Risk for Bonds: Exploring Duration, Convexity, and PVBP

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