A bond paying 6% in semi-annual coupons actually yields 6.09% a year if each coupon is reinvested at the same rate. The effective yield lets you compare bonds with different payment frequencies.
How to use the Effective Annual Yield Calculator
- Face value
- Annual coupon rate
- Coupon frequency
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the face value, the annual coupon rate (or annual coupon amount) and the coupon frequency.
Tips
- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.
Common mistakes to avoid
- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).
Inputs explained
| Field | What to enter |
|---|---|
| Face value | Amount in your currency |
| Annual coupon rate | In % |
| Coupon frequency | Choose one: Annually, Semi-annually, Quarterly, Monthly … |
What each result means
- Annual coupon payment = [Face value]×[Annual coupon rate]÷100
- Coupon per period = [Face value]×[Annual coupon rate]÷100÷[Coupon frequency]
- Effective annual yield = ((1 + [Annual coupon rate]÷100÷[Coupon frequency])^[Coupon frequency] – 1)×100
Example values
How the main result changes when Face value changes and everything else stays at the example values above:
| Face value | Effective annual yield (%) |
|---|---|
| 500 | 6.09 |
| 750 | 6.09 |
| 1,000 | 6.09 |
| 1,250 | 6.09 |
| 1,500 | 6.09 |
| 2,000 | 6.09 |
Formula
Effective annual yield = (1 + coupon rate ÷ n)^n − 1Coupon per period = face value × coupon rate ÷ nWorked example
Inputs — Face value: $1,000; Annual coupon rate: 6 %; Coupon frequency: Semi-annually.
Results — Annual coupon payment = $60.00; Coupon per period = $30.00; Effective annual yield = 6.09 %.
Frequently asked questions
What is effective annual yield?
The yearly return including the effect of reinvesting coupons.
Is it higher than the coupon rate?
Yes, whenever coupons are paid more than once a year.
What is the bond equivalent yield?
A simple annualized yield that ignores compounding.
What formula does the Effective Annual Yield Calculator use?
Effective annual yield = (1 + coupon rate ÷ n)^n − 1.