annual rate of interest paid by a bond, computed by dividing the coupon interest by original purchase price. The current yield of an 8% bond selling at $800 is 10%. Current yield is different from yield to maturity, which includes the annual accretion of interest, as the price rises from $800 to $1,000 at maturity. Current yield is useful in comparing year-to-year changes in bond yield.
annual interest on an investment divided by the market price. In the case of a bond, it is the actual income rate of return as opposed to the coupon rate or the yield to maturity. For example, a 10% (coupon rate) bond with a face (or par) value of $1,000 is bought at a market price of $800. The annual income from the bond is $100. But since only $800 was paid for the bond, the current yield is $100 divided by $800, or 121/2%.
annual interest on a bond divided by the market price. It is the actual income rate of return as opposed to the coupon rate (the two would be equal if the bond were bought at par) or the yield to maturity. For example, a 10% (coupon rate) bond with a face (or par) value of $1,000 is bought at a market price of $800. The annual income from the bond is $100. But since only $800 was paid for the bond, the current yield is $100 divided by $800, or 12½%.
a measurement of investment returns based on the percentage relationship of annual cash income to the investment cost. The formula is
Example: Abel purchases a parking lot for $10,000. It provides $5,000 of parking revenues each year. Property taxes and insurance total $3,500, leaving $1,500 of annual before-income-tax cash flow. The current yield is 15%:
| $1,500 $10,000 | = | 15% |
