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Treasury Bond Yield Formula:
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Treasury bond yield represents the return an investor will receive by holding the bond to maturity. The current yield calculation provides a simple measure of the bond's return based on its current market price and annual coupon payments.
The calculator uses the current yield formula:
Where:
Explanation: This formula calculates the current yield, which is the annual coupon payment divided by the bond's current market price. It provides a quick measure of the bond's return relative to its price.
Details: Calculating treasury bond yield is essential for investors to compare different bond investments, assess returns, and make informed investment decisions. It helps in evaluating the bond's performance relative to other investment options.
Tips: Enter the annual coupon payment in USD and the current bond price in USD. Both values must be positive numbers, with bond price greater than zero.
Q1: What is the difference between current yield and yield to maturity?
A: Current yield only considers the annual coupon payment relative to the bond price, while yield to maturity accounts for all future cash flows including the final principal repayment.
Q2: What are typical treasury bond yields?
A: Treasury bond yields vary based on maturity and market conditions, typically ranging from 1% to 6% for different maturities.
Q3: Why does bond yield move inversely to bond price?
A: When bond prices rise, the fixed coupon payment represents a smaller percentage of the higher price, resulting in lower yield.
Q4: Is current yield the same as coupon rate?
A: No, coupon rate is fixed and based on the bond's face value, while current yield varies with the bond's market price.
Q5: How often are coupon payments made?
A: Most treasury bonds make semi-annual coupon payments, so the annual coupon payment is twice the semi-annual payment.