1. What is Current Yield?

The Current Yield is a bond's annual income (interest or dividends) divided by the current price of the security. It represents the return an investor would expect if the owner purchased the bond and held it for a year.

2. How Does the Calculator Work?

The calculator uses the Current Yield formula:

Where:

• Annual Coupon — Annual interest payment in USD
• Market Price — Current market price of the bond in USD

Explanation: The formula calculates the bond's yield based on its current market price rather than its face value.

3. Importance of Current Yield

Details: Current Yield helps investors compare bonds with different face values and coupon rates. It's particularly useful for assessing income-generating potential of fixed-income securities.

4. Using the Calculator

Tips: Enter the annual coupon payment in USD and the current market price in USD. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does current yield differ from yield to maturity?
A: Current yield only considers annual income relative to price, while YTM accounts for all future cash flows including principal repayment at maturity.

Q2: What are typical current yield ranges?
A: Varies by market conditions, but investment-grade bonds typically range 2-6%, while high-yield bonds may offer 5-10% or more.

Q3: Why does current yield change?
A: It changes as the bond's market price fluctuates, even though the coupon payment remains constant.

Q4: Does current yield include capital gains?
A: No, it only reflects income from coupon payments, not potential price appreciation.

Q5: When is current yield most useful?
A: For comparing income potential of bonds when you don't plan to hold to maturity.