CFA Level I · CFA Level I Exam · Yield and Yield Spread Measures for Fixed-Rate Bonds
A bond with a face value of 1,000 pays an annual coupon of 6% and is priced at 800. The bond's current yield is closest to:
The current yield is 7.5%. It equals the annual coupon of 60 divided by the market price of 800. The 6.0% figure is the coupon rate, which divides the coupon by face value rather than by the current price.
- A6.0%
- B7.5%Correct
- C10.0%
Explanation
Annual coupon = 6% x 1,000 = 60. Current yield = 60 / 800 = 7.5%. The 6.0% option is the coupon rate, which uses face value as the base instead of price.
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