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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 an annual coupon of 8% and is trading at Rs 1,000. What is its current yield?

The current yield is 8%. Current yield is the annual coupon divided by the market price, so Rs 80 divided by Rs 1,000 gives 8%. At par, the current yield equals the coupon rate.

  1. A7.0%
  2. B8.0%Correct
  3. C9.0%
  4. D10.0%

Explanation

Current yield = annual coupon / market price = 80 / 1,000 = 8%. When a bond trades at par, current yield equals the coupon rate. The other options would need a price different from par.

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