1. What is a T-Note Calculator?

Definition: This calculator estimates the price of a Treasury Note (T-Note) based on coupon payments, yield to maturity, and face value.

Purpose: It helps investors determine the fair value of Treasury Notes and make informed investment decisions.

2. How Does the Calculator Work?

The calculator uses the bond pricing formula:

Where:

• \( Price \) — Current price of the bond (USD)
• \( C \) — Coupon payment (USD)
• \( y \) — Yield to maturity (decimal)
• \( t \) — Time to each payment (years)
• \( FV \) — Face value (USD)
• \( n \) — Number of periods (years)

Explanation: The formula discounts all future cash flows (coupon payments and face value) to their present value using the yield to maturity as the discount rate.

3. Importance of Bond Pricing

Details: Accurate bond pricing helps investors assess whether a bond is overpriced or underpriced relative to its expected returns and risk profile.

4. Using the Calculator

Tips: Enter the annual coupon payment, yield to maturity (as decimal), number of years to maturity, and face value (typically $1,000 for T-Notes).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between coupon rate and yield?
A: Coupon rate is fixed and determines the dollar coupon payments. Yield reflects current market conditions and the bond's expected return.

Q2: Why does bond price move inversely to yield?
A: As yields rise, future cash flows are discounted more heavily, reducing the present value (price) of the bond.

Q3: What's a typical yield for Treasury Notes?
A: Treasury Note yields vary with market conditions but typically range between 1% and 5% (0.01 to 0.05 in decimal form).

Q4: How often are coupon payments made?
A: Treasury Notes pay semiannual coupons, but this calculator uses annual compounding for simplicity.

Q5: What happens if I enter a yield of zero?
A: The price becomes the sum of all coupon payments plus face value, as there's no discounting of future cash flows.