5.102
%
5
%
-$20.00
-2
%
$25.00
$4.17
$500.00
$20.00
5.253
%
5.102
%
5
%
-$20.00
-2
%
$25.00
$4.17
$500.00
$20.00
5.253
%
The Current Yield Calculator provides a quick assessment of a bond's annual income relative to its current market price. Current yield is one of the simplest and most commonly cited bond metrics, offering a snapshot of a bond's income-generating capacity at its current price level.
The formula is straightforward: Current Yield = Annual Coupon / Market Price × 100. Unlike yield to maturity (YTM), current yield does not account for capital gains or losses at maturity, nor does it consider the time value of money. This simplicity makes it useful for quick comparisons but incomplete for investment decisions.
Current yield differs from the coupon rate whenever the bond trades away from par. A bond with a $50 annual coupon and $1,000 face value has a 5% coupon rate. If the bond trades at $980, the current yield rises to 5.10% because you receive the same $50 income for a smaller investment. If it trades at $1,050, current yield drops to 4.76%.
This relationship reveals an important principle: when you buy bonds at a discount, your income yield is higher than the coupon rate, and when you buy at a premium, your income yield is lower. This calculator also shows the premium or discount as both a dollar amount and percentage, helping you assess how far the bond has moved from par.
While current yield is a useful starting point, investors should consider YTM for a complete return picture, especially for bonds trading significantly above or below par, or for bonds with unusual maturity dates. Current yield is most useful for comparing bonds of similar maturity and credit quality, or for quick income assessments.
The formulas are: Current Yield = (Annual Coupon / Market Price) × 100. Coupon Rate = (Annual Coupon / Face Value) × 100. Premium/Discount % = (Market Price - Face Value) / Face Value × 100.
If current yield is higher than the coupon rate, the bond trades at a discount (below par), and you are getting a higher income return than the original coupon promised. If current yield is lower than coupon rate, the bond trades at a premium (above par). At par, current yield equals the coupon rate exactly.
Inputs
Results
5% coupon bond trading at $980
Inputs
Results
6% coupon bond trading at $1,100
Current yield is a bond's annual coupon payment divided by its current market price, expressed as a percentage. It measures the income return on the bond at its current price, ignoring capital gains or losses.
Coupon rate uses face value in the denominator; current yield uses market price. They are equal only when the bond trades at exactly par (face value).
No. Current yield only measures income return. YTM also accounts for capital gain/loss at maturity and time value. For discount bonds, YTM > current yield. For premium bonds, YTM < current yield.
Current yield provides a quick income comparison between bonds. It answers the simple question: how much annual income will I receive per dollar invested at the current price?
Yes, when a bond trades below par (at a discount). You are buying the same coupon income for a lower price, so the yield as a percentage of your investment is higher.
It depends on prevailing interest rates and credit quality. In a 4-5% rate environment, investment-grade bonds might offer 4-6% current yield. High-yield bonds may offer 7-10%+ but carry higher default risk.
No. Current yield is a simple ratio that does not consider reinvestment of coupons or any other time-value-of-money concepts. Use YTM for a more complete analysis.
Current yield moves inversely with price. As bond prices rise, current yield falls (same coupon income over a higher price). As prices fall, current yield rises.
A premium bond trades above its face value (e.g., $1,050 for a $1,000 face value). This happens when the coupon rate exceeds prevailing market rates, making the bond's income more attractive.
No. Current yield is only one factor. Also consider YTM, credit rating, maturity, call provisions, and how the bond fits within your overall portfolio. YTM provides a more comprehensive return measure.
Roboculator Team
The Roboculator Team explains calculations, planning tools, and practical formulas in clear language for real-life situations.
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