NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets
A bond with face value Rs 1,000 pays an annual coupon of 8%. It is bought at Rs 800. What is its current yield?
The current yield is 10%. The annual coupon is Rs 80 (8% of the Rs 1,000 face value), and dividing this by the market price of Rs 800 gives 10%. The 8% figure is only the coupon rate, which is based on face value.
- A8.0%
- B10.0%Correct
- C12.5%
- D20.0%
Explanation
Annual coupon = 8% of 1,000 = Rs 80. Current yield = coupon / market price = 80/800 = 10%. The 8% figure is the coupon rate (face-value base), not current yield.
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