1. What is Running Yield?

Running yield (also known as current yield) measures the annual income return on a bond investment relative to its current market price. It's a simple way to assess the income-generating potential of a bond in the UK market.

2. How Does the Calculator Work?

The calculator uses the running yield formula:

Where:

• \( Coupon \) — Annual coupon payment in GBP
• \( Price \) — Current bond price in GBP
• \( Yield \) — Running yield expressed as a decimal

Explanation: The formula calculates what percentage return an investor would receive based on the bond's current market price and annual coupon payments.

3. Importance of Running Yield Calculation

Details: Running yield is essential for bond investors to compare income returns across different bonds, assess investment attractiveness, and make informed decisions about bond portfolio allocation in the UK market.

4. Using the Calculator

Tips: Enter the annual coupon payment and current bond price in GBP. Both values must be positive numbers. The calculator will provide results in both decimal and percentage formats.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between running yield and yield to maturity?
A: Running yield only considers annual income, while yield to maturity accounts for both income and capital gains/losses if held to maturity.

Q2: When is running yield most useful?
A: It's particularly useful for income-focused investors and when comparing bonds with similar maturities in the UK market.

Q3: How does bond price affect running yield?
A: When bond prices fall, running yield increases, and vice versa - creating an inverse relationship.

Q4: Are there limitations to running yield?
A: Yes, it doesn't consider reinvestment risk, time value of money, or capital gains/losses upon maturity.

Q5: What is a good running yield for UK bonds?
A: This depends on current interest rates, bond credit quality, and maturity. Compare against similar bonds and risk-free rates.