Bond Yield Calculator – Compute the Current Yield

Written by:
PK

On this page is a bond yield calculator to calculate the current yield of a bond. Enter the bond's trading price, face or par value, time to maturity, and coupon or stated interest rate to compute a current yield.

The tool will also compute yield to maturity, but see the YTM calculator for a better explanation plus the yield to maturity formula.

Bond Yield Calculator

Current Yield to Maturity Calculator Inputs

• Current Bond Trading Price ($) - The price the bond is trading at today. • Bond Face Value/Par Value ($) - The par value or face value of the bond.
• Years to Maturity - The numbers of years until bond maturity. (You can enter decimals to represent months and days.)
• Annual Coupon Rate - The interest rate paid on the bond.
• Coupon Payment Frequency - How often the interest is paid out on the bond.

Bond Yield Calculator Outputs

• Current Yield (%): The simple yield of the bond computed from the trading price and the coupon payments.
• Yield to Maturity (%): The converged solution for yield to maturity of the bond (its IRR)

What is a bond's current yield?

The current yield of a bond is the annual payout of a bond divided by its current trading price. That is, you sum up all coupon payments over one year and divide by what a bond is paying today.

Bond Current Yield vs. Yield to Maturity

A bond's yield to maturity is the annual percentage gain you'll make on a bond if you hold it until maturity (assuming it doesn't miss payments). It's expressed in an annual percentage, just like the current yield. However, YTM is not current yield – yield to maturity is the discount rate which would set all bond cash flows to the current price of the bond.

You can find more information (including an estimated formula to calculate YTM) on the yield to maturity calculator page.

Current Yield Formula

The bond current yield formula is:

\frac{ACF}{P}

Where:

• ACF - Annual cash flow of the bond
• P - Current market trading price

Example: Calculating the Current Yield on a Bond

Let's work through an example and compute the current yield for an example bond. We'll use the example in the tool's defaults.

• Face value: $1000 • Annual interest rate: 10% (for$100, $1000 * 10%) • Current trading price:$920
\frac{ACF}{P} = \\~\\ \frac{100}{920} = 10.87\%

So, a bond trading at $920 with a face value of$1000 and a 10% interest rate has a 10.87% current yield, higher than the one stated by the bond.

Other Financial Basics and Bond Calculators

Current yield gives you a quick read of how a bond compares in the market. It is inferior to yield to maturity, although YTM does come with the risk that a bond may stop paying out (while your next year of payments is more certain). In almost all cases you should compute both, though.

For other financial basics and bond calculators, please see: