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Current Yield Formula:
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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 price and held it for one year.
The calculator uses the current yield formula:
Where:
Explanation: The formula calculates the annual income return as a percentage of the bond's current market price, providing a quick measure of investment return.
Details: Current yield helps investors compare different bond investments, assess income potential, and make informed decisions about bond portfolio management. It's particularly useful for income-focused investors.
Tips: Enter the annual coupon payment and current bond price in the same currency units. Both values must be positive numbers greater than zero.
Q1: What's the difference between current yield and yield to maturity?
A: Current yield only considers annual coupon payments relative to current price, while yield to maturity accounts for total return including price changes when held to maturity.
Q2: What is a good current yield for bonds?
A: This depends on market conditions, bond quality, and duration. Generally, higher-rated bonds have lower yields, while riskier bonds offer higher yields to compensate for risk.
Q3: Does current yield change over time?
A: Yes, current yield changes as bond prices fluctuate in the market. When bond prices rise, current yield falls, and vice versa.
Q4: Can current yield be negative?
A: No, current yield cannot be negative since both coupon payments and bond prices are positive values. The yield ranges from 0% to positive percentages.
Q5: How does current yield help in investment decisions?
A: It helps investors compare income potential across different bonds and assess whether a bond's current price offers attractive income returns relative to other investment options.