1. What is a Current Yield Calculator?

Definition: This calculator determines the annual return of a bond based on its current market price.

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

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• Current Yield — Annual return expressed as a decimal
• Annual Coupon — Annual interest payment in dollars
• Current Price — Market price of the bond in dollars

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

3. Importance of Current Yield Calculation

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

4. Using the Calculator

Tips: Enter the bond's annual coupon payment and its current market price. Both values 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 income, while yield to maturity accounts for total returns including price changes if held to maturity.

Q2: What does the current yield tell me about a bond?
A: It shows the annual income return you'd receive if you bought the bond at its current price.

Q3: Why would current yield change over time?
A: It changes as the bond's market price fluctuates, since the coupon payment remains constant.

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

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