Current yield

Definition

Current yield in plain English

A bond is basically an IOU: you lend a company money, and it promises to pay you a fixed cash amount every year (the "coupon") until it repays you. Current yield tells you the plain income rate you're earning right now, based on what you actually paid: you take the yearly coupon and divide it by the bond's current price. If a bond pays $50 a year and you buy it for $1,000, the current yield is 50/1000 = 5% — the same idea as rent divided by a property's price. It's a quick snapshot of cash-in versus price, though it ignores any gain or loss you'd get when the bond is finally repaid.

Related Principles of Finance terms

• Accrued interest
• Allocation effect
• Basis
• Basis point
• Benchmark
• Bond-equivalent yield (BEY)
• Bootstrapping
• Callable bond
• Clean price
• Comparable company analysis (comps)