Case 1
- Face value
- 1000
- Coupon rate
- 5%
- Market price
- 950
5.26%
Open with these valuesBond Current Yield Calculator
5.26%
Result: 5.26 %Current yield measures the coupon against the price you pay, not against the face value. A 1000 bond with a 5 % coupon pays 50 a year: bought at 950 that is 5.26 %, bought at 1100 only 4.55 %. It says nothing about the gain or loss when the bond is repaid at par.
Worked examples
Case 2
- Face value
- 1000
- Coupon rate
- 6%
- Market price
- 1000
6.00%
Open with these valuesCase 3
- Face value
- 1000
- Coupon rate
- 4%
- Market price
- 1100
3.64%
Open with these valuesHow it's calculated
Current yield = Face value × Coupon rate ÷ Price × 100
- StepMultiply the face value by the coupon rate to get the annual coupon in money.
- StepDivide that coupon by the price you actually pay for the bond.
- ResultMultiply by 100 to read the running income as a percentage.
What this number means
This is not the yield to maturity
Current yield counts only the annual coupon against the price. Any capital gain or loss on repayment at face value is left out entirely, and yield to maturity is the figure that adds it back.
The divisor is the price, not the face value
A 1000 bond with a 5 % coupon pays 50 a year whatever it costs. Bought at 950 that is 5.26 %, bought at 1100 only 4.55 %, and at par exactly the coupon rate of 5 %.
Enter the coupon as a percentage number
Type 5 for a 5 % coupon, not 0.05. The coupon in money is face value times that rate, so 1000 at 5 % gives 50.
A zero-coupon bond reads 0 % here
With no periodic interest the annual coupon is nil, so the current yield is zero by definition. Its whole return sits in the discount to face value, which only yield to maturity measures.
Commonly misread
A current yield above the coupon rate means the bond gained.
It means the price sits below face value. At 950 a 5 % coupon reads 5.26 %, while above par at 1100 it reads 4.55 %.
The higher current yield is the better bond.
It measures running income against price and nothing else. What the bond repays at maturity is not in this number.
The coupon rate moves with the market.
The coupon rate is fixed against the face value and never changes. What moves is the price, and with it the current yield.
Reference table
| Face, coupon, price | Position | Current yield |
|---|---|---|
| 1000, 5, 800 | Deep discount | 6.25 |
| 1000, 5, 900 | Discount | 5.56 |
| 1000, 5, 950 | Discount | 5.26 |
| 1000, 5, 1000 | At par | 5.00 |
| 1000, 5, 1050 | Premium | 4.76 |
| 1000, 5, 1100 | Premium | 4.55 |
Questions
What is a bond's current yield?
Current yield is a bond's annual coupon income divided by its current market price, as a percentage. It tells you the running income return for the price you pay today. It deliberately leaves out any capital gain or loss realised when the bond matures.
How do I calculate current yield?
Multiply the face value by the coupon rate to get the annual coupon, divide by the price you pay, then multiply by 100. A 1000 bond with a 5 % coupon trading at 950 gives 50 ÷ 950 × 100, about 5.26 %.
How is current yield different from the coupon rate?
The coupon rate is fixed against the face value and never changes; the current yield measures that same coupon against the price you actually pay, which moves. Below face value the current yield is higher than the coupon rate, above face value it is lower. They are equal only at par.
How is current yield different from yield to maturity?
Current yield counts only the annual coupon relative to price. Yield to maturity goes further, adding the capital gain or loss from repayment at face value and accounting for the time left. For a discount bond it is higher than the current yield, for a premium bond lower.
What is the current yield of a zero-coupon bond?
Zero. A zero-coupon bond pays no periodic interest, so its annual coupon is nil and its current yield is 0 % by definition. Its whole return comes from the discount to face value, which yield to maturity measures and current yield does not.
Sources and last check
Information, not financial advice.