Current Yield
Private Credit glossary · Documentation, Covenants & Terms
Definition
Annual interest income divided by current fair value.
Current Yield in plain English
Current yield answers a simple question: for every dollar this investment is worth right now, how much cash does it hand me each year? You take the yearly interest income and divide it by what the investment is actually worth today. If a bond pays you $8 a year in interest and it's currently worth $100, the current yield is 8%; but if that same bond's value drops to $80, the same $8 now works out to a 10% yield, because you're getting the same cash for a cheaper price. It's a quick snapshot of the income you're earning, not a full picture of total profit.
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