Current yield

The current yield of an interest-bearing bond is the sum of coupon payments per year divided by the current market value of the bond. In the past, the current rate of return was used instead of the yield to maturity .

Current yield =

C/P_{0}.

{\ displaystyle C / P_ {0}.}

C / P_ {0}.

Current yield is a simplified indicator that allows you to compare multiple bonds.

It does not reflect the total yield of the bond over its entire term. Not taken into account:

reinvestment risk (uncertainty of the rate at which future cash flows of a bond may be reinvested) or
the fact that the bond is redeemed at par, and this is a significant part of the bond's income.

Calculation Example

Calculation of the current yield of a bond with a face value of $ 100, coupon rate of 5.00% and a market value of $ 95.00 (net price not including VAT):

${\text{Current Yield}}={\frac {F\times r}{P}}={\frac {\$100\times 5.00\%}{\$95.00}}\times 100\%={\frac {1}{19}}*100\%\approx 5.2631\%.$ ${\ displaystyle {\ text {Current Yield}} = {\ frac {F \ times r} {P}} = {\ frac {\ $ 100 \ times 5.00 \%} {\ $ 95.00}} \ times 100 \% = { \ frac {1} {19}} * 100 \% \ approx 5.2631 \%.}$

Correlation with other types of profitability

Premium bond (price above face value): Coupon rate> = Current yield> = Yield to maturity
Bonds at par: Coupon rate = Current yield = Yield to maturity
Discounted Bonds: Coupon Rate = <Current Yield = <Yield to Maturity

Current yield

Calculation Example

Correlation with other types of profitability

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