NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Fixed Income Securities (NISM XXI-A)
A bond with a face value of ₹1,000 pays an annual coupon of ₹80. If the bond is currently trading at ₹1,000, which of the following is its current yield?
The current yield is 8%. It is calculated as the annual coupon of ₹80 divided by the market price of ₹1,000. Because the bond trades at par, the current yield equals the coupon rate of 8%.
- A6%
- B8%Correct
- C10%
- D80%
Explanation
Current yield = annual coupon / market price = 80 / 1,000 = 8%. A price equal to face value means current yield equals the coupon rate. The 80% option divides by the wrong base or misplaces the decimal.
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