What this calculator does
Current yield is the simplest bond measure there is: the annual coupon divided by what you pay today. It answers only the income question and deliberately ignores any gain or loss between the purchase price and the face value repaid at maturity.
It moves inversely with price, which is the whole point. A 5 per cent coupon bond bought at $950 yields 5.26 per cent; bought at $1,100 it yields only 4.55 per cent, on identical coupon payments.
The formula
The annual coupon is face value times the coupon rate. Dividing that by the current market price gives the current yield.
| Term | Meaning |
|---|---|
| Current yield | Annual coupon divided by market price, as a percentage. |
| Coupon rate | The fixed rate applied to face value, which sets the payment. |
| Discount and premium | Trading below or above face value, which pushes current yield above or below the coupon rate. |
The inputs explained
| Field | What to enter |
|---|---|
| Face (par) value ($) | Face or par value, usually 1,000. |
| Annual coupon rate (%) | The annual coupon rate as a percentage of face value. |
| Current market price ($) | What the bond currently trades at. |
When to use it
Assessing income from a bond
For an investor holding for income rather than to maturity, this is the relevant figure.
Comparing against a dividend yield
Current yield is the bond equivalent of a share's dividend yield.
Quick screening
It takes two numbers and no iteration, which makes it usable at a glance.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How does price change the income return?
The same bond at four market prices.
| Market price | Current yield | Annual coupon payment |
|---|---|---|
| $900 | 5.56% | $50.00 |
| $950 | 5.26% | $50.00 |
| $1,000 | 5.00% | $50.00 |
| $1,100 | 4.55% | $50.00 |
Questions
How does this differ from yield to maturity?
Current yield counts only the coupon against the price. Yield to maturity also includes the gain or loss between what you pay and the face value returned at maturity, which is why the two differ whenever a bond trades away from par.
When is current yield the more useful figure?
When you are buying for income and do not intend to hold to maturity. It tells you the cash return on the money committed, which is exactly what an income investor is asking.
Why does it equal the coupon rate at par?
Because the coupon is calculated on face value, so when price equals face value the same number appears in both the numerator and the denominator of the ratio.
What does current yield miss?
The capital outcome. A bond bought at $900 will return $1,000 at maturity, and that $100 gain is real return that current yield ignores entirely. For a discount bond it understates the total return substantially.
For the full return including capital gain, see the bond yield to maturity calculator. For price sensitivity to rates, see the bond duration and convexity calculator.