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Current Yield Formula:
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Current yield is a measure of the income return on a bond fund investment, calculated as the annual coupon payments divided by the current market price. It represents the percentage return an investor would receive if they purchased the bond at its current price.
The calculator uses the current yield formula:
Where:
Explanation: This formula calculates the simple annual return based on the bond's coupon payments relative to its current market price, providing investors with a quick measure of income potential.
Details: Calculating current yield helps investors compare different bond funds, assess income potential, and make informed investment decisions based on current market conditions.
Tips: Enter the total annual coupon payments and current market price in the same currency. Both values must be positive numbers greater than zero for accurate calculation.
Q1: What is the difference between current yield and yield to maturity?
A: Current yield only considers annual coupon payments relative to current price, while yield to maturity accounts for total return including price appreciation/depreciation until maturity.
Q2: What are typical bond fund yield ranges?
A: Yields vary by bond type and market conditions, typically ranging from 2-8% for investment-grade bonds, with higher yields for higher-risk bonds.
Q3: How often should yield be calculated?
A: Yield should be monitored regularly as bond prices fluctuate with interest rate changes and market conditions.
Q4: Does current yield consider reinvestment risk?
A: No, current yield does not account for reinvestment risk or the time value of money - it's a simple annual income measure.
Q5: Can current yield be negative?
A: No, current yield cannot be negative as it represents income return. However, total return can be negative if price depreciation exceeds coupon payments.