Simple calculator to compare the relationship between bond yields and interest rates. See how bond prices move inversely to interest rates and understand the impact of rate changes.
Enter bond details and click calculate to see the relationship between bond price and interest rates
Bond vs Interest Calculator
The Bond vs Interest Calculator is a simple calculator that is designed to help you understand the basic inverse relationship between bond prices and interest rates. The easy to use sliders and Preset Scenarios will help you quickly see the relationship between bond prices and interest rates.
When interest rates rise, bond prices typically fall, and vice versa. This calculator demonstrates this fundamental principle of bond investing and helps you visualize how changes in interest rates affect bond values.
How is this different than what happens in the real world?
In the real world, bond prices are affected by many factors not included in this simple calculation, including the credit quality of the issuer, underlying currency, the maturity of the bond, and the market demand for bonds.
The following table will show you some differences.
Aspect | Calculator | Real World |
---|---|---|
Interest Rate Changes | Parallel, predictable shifts | Non-parallel, unpredictable shifts |
Credit/Liquidity Risk | Ignored | Significant impact |
Yield Curve | Flat, simple | Dynamic, can steepen/flatten/invert |
Embedded Options | Ignored | Affect sensitivity and price changes |
Taxes | Ignored | Affect after-tax yield and pricing |
Inflation/Market Forces | Ignored | Major influence on rates/prices |
Once you understand the basic relationship between bond prices and interest rates, and you see some of the gaps in this simple calculator you're ready to start filling in those gaps and adding some more complexity to your understanding of bonds and interest rates.
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