1. What is Bond Yield?

Bond yield represents the return an investor realizes on a bond. The current yield specifically measures the annual coupon payment relative to the bond's current market price, providing insight into the income return of the investment.

2. How Does the Calculator Work?

The calculator uses the current yield formula:

Where:

• \( C \) — Annual coupon payment (currency units)
• \( P \) — Bond price (currency units)

Explanation: This formula calculates the simple current yield, which represents the annual income return as a percentage of the bond's current market price.

3. Importance of Bond Yield Calculation

Details: Calculating bond yield is essential for investors to compare different bond investments, assess income potential, and make informed investment decisions based on risk-return profiles.

4. Using the Calculator

Tips: Enter the annual coupon payment and current bond price in the same currency units. Both values must be positive numbers greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between current yield and yield to maturity?
A: Current yield only considers annual coupon payments, while yield to maturity accounts for total return including price appreciation/depreciation if held to maturity.

Q2: What is a good bond yield?
A: This depends on market conditions, bond credit rating, and duration. Higher yields typically compensate for higher risk.

Q3: Why does bond yield move inversely to bond price?
A: When bond prices fall, the fixed coupon payment represents a higher percentage of the lower price, resulting in higher yield.

Q4: How does coupon rate relate to yield?
A: Coupon rate is fixed at issuance, while yield fluctuates with market price changes. When bond trades at par, yield equals coupon rate.

Q5: Should I consider other factors besides yield?
A: Yes, also consider credit risk, duration, call provisions, and overall portfolio diversification when evaluating bonds.