NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets
The term 'current yield' of a bond is defined as:
Current yield is the annual coupon payment divided by the bond's current market price. It measures income return only and ignores capital gains or losses to maturity, unlike yield to maturity, and differs from the coupon rate, which uses face value.
- AAnnual coupon divided by the current market priceCorrect
- BAnnual coupon divided by the face value
- CTotal return until maturity including capital gains
- DFace value divided by market price
Explanation
Current yield = annual coupon income / current market price. Coupon divided by face value is the coupon rate. Yield to maturity includes capital gains or losses until maturity, which current yield ignores.
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