How It Works
Annual coupon income equals face value multiplied by coupon rate. Current yield divides that annual income by the current market price.
Current yield measures annual coupon income relative to the bond's current market price. If the bond trades below face value, current yield will generally be higher than the coupon rate; if it trades above face value, it will generally be lower.
This calculator does not calculate yield to maturity because that requires the bond's purchase price, remaining time to maturity, coupon schedule, and repayment of face value.
Formula
- F — Face value
- c — Coupon rate
- P — Market price
Example
Example inputs: Face value $1,000, coupon 5%, market price $950.
Result: Annual coupon: $50. Current yield: about 5.26%.
Frequently Asked Questions
Is current yield the same as yield to maturity?
No. Yield to maturity incorporates the purchase price, coupon payments, time to maturity, and repayment of face value.
What does current yield leave out?
Current yield does not account for the difference between the market price and face value at maturity, the timing of cash flows, or reinvestment. Yield to maturity incorporates those factors.
Can current yield be higher than the coupon rate?
Yes. When a bond trades below face value, the same annual coupon income is divided by a lower market price, producing a higher current yield.
This calculator provides estimates for informational purposes only and should not be considered financial, tax, or legal advice.