1. What is a Bond Current Yield Calculator?

Definition: This calculator determines the annual return (current yield) of a bond based on its annual coupon payments and current market price.

Purpose: It helps investors evaluate bond investments by showing the income return relative to the bond's current market price.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• Current Yield — Annual return expressed as a decimal
• Annual Coupon — Total yearly interest payments ($)
• Current Price — Market price of the bond ($)

Explanation: The annual coupon payment is divided by the bond's current market price to determine its yield at the current price level.

3. Importance of Current Yield Calculation

Details: Current yield helps investors compare bonds with different prices and coupon rates, providing a standardized measure of income return.

4. Using the Calculator

Tips: Enter the bond's annual coupon payment in dollars and its current market price in dollars. Current price must be greater than $0.

5. Frequently Asked Questions (FAQ)

Q1: How is current yield different from yield to maturity?
A: Current yield only considers annual coupon payments, while yield to maturity accounts for all future cash flows including principal repayment.

Q2: What does the current yield tell me?
A: It shows the income return you'd receive if you bought the bond at its current price and held it for one year.

Q3: Why would current yield change?
A: It changes when the bond's market price fluctuates, even though coupon payments remain constant.

Q4: How do I convert the decimal result to a percentage?
A: Multiply the result by 100 (e.g., 0.05 = 5% yield).

Q5: Does this include capital gains/losses?
A: No, current yield only reflects the income component, not price appreciation/depreciation.