Yield

Current yield:

The current market price of the bond in the secondary market may

differ from its face value $($i$.$e$.$ it may be currently selling at a

discount or at a premium$)$ Current yield relates the annual

interest receivable on a bond to its current market price

Current yield Annual interest$/$current market price$)**100.$

Example: A bond has a face value of Rs$.1000$ and a coupon rate

of $12\%.$ It is currently selling for Rs$.800.$

Current yield $=$ C $/$ PO$.$

Current yield $>$ coupon rate : when bond is selling at a discount

Current yield $$ coupon rate : when bond is selling at a premium