Enter the bond selling price ($) and the bond purchase price ($) into the calculator to determine the Bond Profit. 

Bond Profit Formula

The following formula is used to calculate the Bond Profit. 

BP = BSP - BPP 
  • Where BP is the Bond Profit ($)
  • BSP is the bond selling price ($) 
  • BPP is the bond purchase price ($) 

How to Calculate Bond Profit?

The following example problems outline how to calculate Bond Profit.

Example Problem #1:

  1. First, determine the bond selling price ($). In this example, the bond selling price ($) is given as 600.
  2. Next, determine the bond purchase price ($). For this problem, the bond purchase price ($) is given as 350.
  3. Finally, calculate the Bond Profit using the equation above: 

BP = BSP – BPP 

The values given above are inserted into the equation below:

BP = 600 – 350  = 250 ($)


FAQ

What factors can affect the selling price of a bond?

The selling price of a bond can be affected by various factors including interest rate changes, the bond’s credit rating, market demand, and the time remaining until maturity. Generally, if interest rates rise, the value of existing bonds falls, and vice versa. A bond’s credit rating reflects the issuer’s ability to repay, with higher ratings leading to higher selling prices. Market demand can fluctuate based on economic conditions, and bonds closer to their maturity date may sell for prices closer to their face value.

How does the bond purchase price impact the overall profit?

The bond purchase price directly impacts the overall profit as it represents the initial investment. The lower the purchase price relative to the selling price, the higher the profit. This is because the profit is calculated as the difference between the selling price and the purchase price. Therefore, buying bonds at a lower price and selling them at a higher price maximizes profit, assuming all other factors remain constant.

Can you sell a bond before it matures, and how does this affect profit?

Yes, bonds can be sold before their maturity date. Selling a bond before it matures can affect the profit in several ways. If the bond is sold when interest rates are lower than when it was purchased, it may sell for a higher price, increasing profit. Conversely, selling when interest rates are higher can result in a lower selling price and reduced profit. Additionally, market conditions, such as changes in demand for bonds, can also impact the selling price and thus the profit from the sale.