About the Bond Ladder Calculator
This bond ladder calculator builds an evenly spaced ladder of bonds, Treasuries or CDs that mature one year apart. Enter the amount to invest, the number of rungs, the yield on the shortest and the longest rung and the first maturity year, and it splits the money equally, interpolates a yield for every rung in between and shows the interest income and principal you receive each year.
Ladders are popular with retirees and conservative savers who want predictable income and a slice of their money coming back every year, without betting on where interest rates go next. Turn on reinvestment to roll each maturing rung into a new bond at the long end, which keeps the ladder going and is how most people run one in practice.
Each rung is assumed to be bought at par with a coupon equal to its yield and held to maturity, with no defaults, calls or reinvestment of the interest itself. Yields between the first and last rung are interpolated in a straight line; replace them with real quotes when you buy. Treasury interest is exempt from state income tax, but taxes are not deducted here.
With the default inputs, the interest income in year 1 is $4,050.00. Change any value above to recalculate instantly.
How to use the bond ladder calculator
- 1Enter the total amount you want to put into the ladder.
- 2Choose how many yearly rungs to build (5 and 10 are common).
- 3Enter current yields for the shortest and longest maturities, e.g. 1-year and 5-year Treasury yields.
- 4Turn on reinvestment if you plan to roll maturing rungs into new long bonds.
- 5Review year-by-year income and principal in the chart and the rung table.
Formula and method
The investment is divided equally across N rungs maturing one year apart. The shortest rung earns the short yield and the longest the long yield; rungs in between get a straight-line interpolated yield. Each rung is assumed to be bought at par with a coupon equal to its yield, so its yearly interest is simply amount × yield (paid semi-annually for most bonds, but summed by year here).
Without reinvestment, a rung stops paying interest after it matures and its principal is returned that year, so income steps down as the ladder winds down. With reinvestment, each maturing rung buys a new N-year bond at the long-end yield, keeping N rungs in place and gradually moving the whole ladder to the long yield. Interest is not compounded; coupons are treated as cash you receive.
- N
- Number of rungs (one per year)
- A
- Amount invested in each rung
- yₖ
- Yield of rung k (k = 1 is the shortest)
- t
- Projection year
Worked examples
$100,000 five-year Treasury ladder
Each rung gets $20,000 at yields of 3.8%, 3.925%, 4.05%, 4.175% and 4.3%, so year-one interest is $4,050 (a 4.05% average). As rungs mature the income falls, and over the ladder’s life you collect $12,400 of interest plus your $100,000 back.
Same ladder with reinvestment for 10 years
Rolling each maturing $20,000 into a new 5-year bond at 4.3% moves the ladder up to the long-end yield: income climbs from $4,050 to $4,300 a year once all five rungs have rolled, for $42,500 of interest over ten years while the $100,000 stays invested.
$250,000 ten-rung ladder from 3.5% to 4.5%
Ten rungs of $25,000 with yields spaced evenly from 3.5% to 4.5% average exactly 4%, so first-year interest is $10,000. Holding every rung to maturity produces about $57,292 of interest over ten years.
Frequently asked questions
What is a bond ladder?+
A bond ladder is a portfolio of individual bonds, Treasuries or CDs that mature in different years, such as one each year for five years. As each rung matures you can spend the principal or reinvest it at the long end, which smooths out interest-rate risk and gives predictable cash flow.
How many rungs should a bond ladder have?+
Five to ten yearly rungs are common. More rungs spread interest-rate risk and reinvestment timing more evenly, but each rung should be large enough to buy bonds efficiently — Treasuries can be bought in $100 increments, while many corporate and municipal bonds trade in $1,000–$5,000 lots.
Is a Treasury ladder better than a bond fund?+
A ladder of individual Treasuries returns your exact principal at each maturity if held, while a bond fund never matures and its price moves with rates. Funds are more diversified and convenient; ladders give certainty of cash flows. Treasury interest is also exempt from state and local income tax.
What happens to a bond ladder when interest rates rise?+
The market value of the longer rungs falls, but if you hold them to maturity you still receive full principal. Meanwhile each maturing rung can be reinvested at the new, higher rates, so a ladder benefits gradually from rising rates.
Does this calculator compound interest?+
No. It treats coupons as cash you receive and spend, which is how income ladders are usually used. If you reinvest coupons too, your total return will be somewhat higher than the interest shown.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.