Bonds, returns and business math Updated November 2026

Current yield

Current yield = annual coupon payment / current bond price. It measures the income return only, ignoring the gain or loss when the bond is repaid at par. For a bond below par, current yield is above the coupon rate but below the YTM; for a premium bond the order is reversed.

Syntax

current yield = annual coupon / price

Part	What it is
`annual coupon`	Face value x coupon rate (sum of all coupons in a year)
`price`	Current market price of the bond

Examples

5% coupon on 1,000 face, price 950
50 / 950

Result: Current yield = 5.26% (YTM for 10 years: 5.67%)

6% coupon on 1,000 face, price 1,050
60 / 1,050

Result: Current yield = 5.71% (YTM for 5 years: 4.86%)

8% coupon, price 1,100
80 / 1,100

Result: Current yield = 7.27%

Common mistakes

Dividing by face value instead of market price; that just gives back the coupon rate.
Using one semiannual coupon in the numerator; the formula uses the full year's coupon income.
Treating current yield as total return: it leaves out the pull to par, so it overstates return on premium bonds and understates it on discount bonds.

Practice Current yield

These drills check your answer on live data, free, no account needed.

Current yieldA $1,000 bond with a 2% annual coupon rate, paid semiannually, trades at $802.50. What is its current yield?
Yield to maturityA $1,000 bond with a 2% coupon, paid semiannually, matures in 15 years and trades at $908.25. What is its yield to maturity, stated as an annual rate compounded semiannually?

Questions

Current yield vs yield to maturity: which should I use?

YTM, for comparing bonds, because it includes the capital gain or loss at maturity. Current yield is a quick income measure, useful if you care mainly about cash flow.

Is current yield the same as dividend yield?

They are analogous: both divide annual income by current price. Dividend yield is for stocks, current yield for bonds.

Yield to maturity (YTM)YTM is the discount rate that makes a bond price equal the present value of its cash flows. The approximation formula, examples, Excel RATE and YIELD, errors.
Bond priceA bond price is the present value of its coupons plus the present value of its face value at the yield. Annual and semiannual examples, premium and discount.
Holding period returnHolding period return is (ending value - beginning value + income) / beginning value. Stock and bond examples, how to annualize an HPR and common mistakes.
Real vs nominal returnThe real return strips inflation out of a nominal return: real = (1 + nominal) / (1 + inflation) - 1. Examples, the quick approximation and its errors.