A tool for estimating the effect of interest rate fluctuations on market price for Treasury security holdings

Maturity | Face Value | Coupon Yield (or interest rate at issuance for <6M T-bills) |
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*Disabled for now - will be able to show and compare multiple securities in the future

Enter the details of a Treasury security at issuance. The graph will display a curve of how the theoretical secondary market price could be expected to change given a change in market interest rates. An estimated market value (Y-axis) is plotted based on the present value of the coupon payments and face value of the security at a range of possible market interest rates (X-axis).

The discounted cash flow formula for a Treasury security with coupon payments is:

r = market interest rate

n = number of years to maturity

c = coupon yield

t = time since issuance (in years)

present value = c * (1 - (1 + r)^(-n)) / r + f * (1 + r)^(-n)

This tool does not factor in time that may pass, which gradually lowers the duration of the security and therefore the impact of market interest rate fluctuations. The actual price shift on the secondary market is likely to be less than indicated by the chart because of such time passage. Secondary market liquidity and bid ask spreads may also lead to differences from the theoretical price estimated by the chart. Credit default risk is also not factored because US Treasuries are generally considered to be "risk free", meaning they do not carry a risk of default.

This tool also builds its calculations based on the assumption of a sudden, parallel shift in the yield curve. A change in the shape of the yield curve may also affect security pricing. This tool applies a single generalized interest rate for discounting cash flows to present value. An alternative approach to calculation called the bootstrapping method (not used here) provides a more precise estimate that accounts for the shape of the yield curve."

The discounted cash flow modeling used by this calculator may also be useful for approximating the value of other kinds of fixed income bonds and securities as well, but keep in mind that it does not factor in firm-specific risk premium.

This tool is for educational purposes to demonstrate the inverse relationship of interest rates and fixed income security valuation and should not be considered investment advice. Consult your financial and tax professional for any investment decisions.