How do I calculate the total return on a bond series given its yields? Is there an equation? I looked at this Investopedia article, but it only refers to stocks in general.
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(Just to clarify) Are you looking to calculate the total returns on a bond series given its yields?– John BensinCommented Jun 14, 2013 at 16:41
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Yup. So its kinda like what you get if you download the adjusted closing prices from yahoo.– user1234440Commented Jun 14, 2013 at 17:00
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1 Answer
It depends of the specifics of the bond, but assuming that you are holding to maturity and the coupon payments are semi-annual, you want a YTM calculator such as the one at Prentice Hall here. The major difference with a YTM calculation is that you are adding back the face value at maturity.
The total return varies based on the purchase price, discount rate, face value, and the number of remaining payments.
In a "real world" situation, you should also be aware that this equation does not account for any amount of default risk, so if you buy a bunch of junk, in reality you may get less.
