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 Rs 1,000 pays an annual coupon of Rs 80. If the bond is bought at Rs 1,000, what is its current yield?
The current yield is 8 percent. It is calculated by dividing the annual coupon of Rs 80 by the purchase price of Rs 1,000. Since the bond is bought at par, the current yield equals its coupon rate.
- A6.0%
- B8.0%Correct
- C10.0%
- D12.5%
Explanation
Current yield = annual coupon / market price = 80/1,000 = 8%. Because the price equals face value, current yield equals the coupon rate. Other options come from using wrong bases or arbitrary figures.
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