Bond Current Yield Calculator

Understanding Bond Current Yield

The current yield of a bond measures the annual income generated by the bond relative to its current market price. Unlike yield to maturity (YTM), which accounts for capital gains or losses realized if held until redemption, current yield focuses purely on annual cash flow return.

Current Yield Formula

The current yield formula is straightforward:

$$\text{Current Yield} = \frac{\text{Annual Coupon Payment}}{\text{Current Market Price}} \times 100\%$$

where the annual coupon payment is calculated as:

$$\text{Annual Coupon Payment} = \text{Par Value} \times \frac{\text{Coupon Rate}}{100}$$

Current Yield vs Coupon Rate vs Yield to Maturity

The relationship between a bond's price and its yields depends on whether it trades at par, discount, or premium:

• Discount Bond (Market Price < Par Value): Coupon Rate < Current Yield < Yield to Maturity.
• Par Bond (Market Price = Par Value): Coupon Rate = Current Yield = Yield to Maturity.
• Premium Bond (Market Price > Par Value): Coupon Rate > Current Yield > Yield to Maturity.