How does current yield differ from YTM?

Current yield = annual coupon / price, ignoring time value and principal repayment. YTM accounts for all cash flows including par repayment at maturity. For discount bonds, YTM exceeds current yield; for premium bonds, YTM is below current yield. YTM is the preferred return measure for comparison.

When is current yield most useful?

Current yield is useful for comparing income generation across bonds with different coupons and prices, particularly for investors focused on cash flow rather than total return. It is commonly used for perpetual bonds and preferred shares where maturity is indefinite.

Current Yield from Coupon and Price

Calculate current yield as annual coupon payment divided by market price, providing a simple income-to-price ratio that ignores capital gains or losses from premium/discount bonds.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How It Works

Calculate current yield as annual coupon payment divided by market price, providing a simple income-to-price ratio that ignores capital gains or losses from premium/discount bonds

Each component has a specific meaning:

Premium/discount bonds — The premium/discount bonds recorded for the scenario being assessed.

Note: Interpret the current yield result against the thresholds and context described above.

How to Use

Enter the premium/discount bonds for the scenario you are assessing. Calculate current yield as annual coupon payment divided by market price, providing a simple income-to-price ratio that ignores capital gains or losses from premium/discount bonds. Use the current yield result to inform your calculation.

Related Calculators

Bond Price YTM

Finance Long-tail

Yield to Call