Bond CalculatorAre you looking to buy bonds but are unsure which ones will be the best investment for you? Before you purchase a bond, use this advanced, easy to use bond calculator to determine whether or not it is a good investment. This calculator leverages the bond’s years to maturity, the capital gains tax rate and your income tax bracket rate to calculate your overall, after-tax net gain. If the bond is selling at a premium, use the tab labeled “Premium Bonds”. If the bond is selling at a discount, use the tab labeled “Discounted Bonds”. Simply fill in the the yellow cells and the calculator will do the rest!
If the bond is selling for under $1,000 then use the “Discounted Bonds” tab. If the bond is selling for over $1,000 then use the “Premium Bonds” tab.
1. Insert the current market price only 1 bond into the yellow cell.
2. Insert the accrued interest for only 1 bond into the corresponding yellow cell.
3. Insert the face value of 1 bond into the corresponding yellow cell. (Note: most bonds have a face value of $1,000)
4. Insert the coupon rate, or interest rate of the bond into the corresponding yellow cell.
5. Insert the bond’s number of interest Payments Per Year into the correspondng yellow cell. (1, 2, 4 or 12)
6. Enter the number of bonds you wish to buy into the corresponding yellow cell.
7. Enter the years to maturity into the corresponding yellow cell. (Do not round to ensure accuracy. E.x. If the bond matures in 14 months, enter “1.17”)
8. Enter your income tax bracket rate & the proper capital gains tax rate. (If it is a premium bond, you will only need your income tax rate)
The green highlighted cells will be your output values. Pay special attention to the “After-Tax Net Gain” cells as these are what you will use to make your investment decision. The first “After-Tax Net Gain” cell adds the after-tax gains from the total face value received at the bond’s maturity with the total after-tax gains of all interest payments received. Basically, your total after-tax earnings.
The second “After-Tax Net Gain” cell divides your total after-tax earnings by the total amount you spent to purchase the bonds.
The CUSIP cell will help you remember what bond your valuing and the Bond Rating cell will help you weigh between risk and reward.
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