How to Calculate the Yield of a Bond

Video Transcript

"O.k. so how do we calculate the yield on a bond? It's actually very simple. You need two things, you need the amount of money that is paying out whether it be semi-annually or annually or quarterly. You need to find that that number. Also need to know what your coupon amount is. The the price of that bond. For example, if you had a thousand dollar bond and it was paying a hundred dollars then you would divide one hundred by a thousand, you get ten percent. So I'm guessing your bond is probably not worth ten percent but that's a good way to understand it. Now that yield and the reason you might be asking how do you calculate it is because the price of the bond might not be at par or its thousand dollar or one hundred percent value. So it that the same rule applies, find out how much the bond is paying in dollars and divide that number by the bond value, and that will give you the percentage yield."