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Current Yield Formula:
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The Current Yield is a financial ratio that measures the annual income return on a bond investment relative to its current market price. It represents the percentage return an investor would receive if they purchased the bond at its current market price and held it for one year.
The calculator uses the Current Yield formula:
Where:
Explanation: This formula calculates the simple yield based on the bond's annual interest payments and current market price, providing a quick measure of income return.
Details: Current Yield is essential for bond investors to compare the income-generating potential of different bonds and assess whether a bond is trading at a premium or discount relative to its coupon rate.
Tips: Enter the annual interest payment in currency units and the current market price in currency units. Both values must be positive numbers greater than zero.
Q1: What is the difference between current yield and yield to maturity?
A: Current Yield only considers annual interest payments relative to market price, while Yield to Maturity accounts for total return including capital gains/losses if held to maturity.
Q2: What is considered a good current yield?
A: A "good" current yield depends on market conditions, but generally higher yields indicate higher income potential, though they may also reflect higher risk.
Q3: How does market price affect current yield?
A: When market price decreases, current yield increases (and vice versa), assuming the annual interest payment remains constant.
Q4: Does current yield consider bond maturity?
A: No, current yield only considers the annual income relative to current price and does not account for the bond's time to maturity.
Q5: When is current yield most useful?
A: Current yield is most useful for income-focused investors who prioritize regular interest payments over total return to maturity.