NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Fixed Income Securities
A bond with a face value of Rs 1,000 pays a 9% annual coupon and is currently trading at Rs 1,000. What is its current yield?
The current yield is 9.00%. Current yield is the annual coupon divided by the market price, so Rs 90 divided by Rs 1,000 gives 9%. A bond trading at par always has a current yield equal to its coupon rate.
- A8.00%
- B9.00%Correct
- C10.00%
- D9.90%
Explanation
Current yield = annual coupon / market price = 90 / 1,000 = 9.00%. When a bond trades at par, the current yield equals the coupon rate. The other values do not result from this ratio.
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