Definition
Current yield measures the income return on a bond based on its current market price rather than face value. Unlike YTM, it doesn't account for capital gains or losses if held to maturity. It's a simple way to compare income from bonds trading at different prices.
Formula
Current Yield = Annual Coupon Payment / Current Market Price
Example
A bond paying $50 annually trading at $900 has a current yield of 5.56% ($50 / $900).
FAQ
What is Current Yield?
A bond's annual coupon payment divided by its current market price.
How do you calculate Current Yield?
A common formula for Current Yield is: Current Yield = Annual Coupon Payment / Current Market Price
Why is Current Yield important?
Current Yield helps investors evaluate fixed income and make more informed decisions.