Current Yield
The current yield is defined as the coupon payment (C) as a percentage of the (current) bond price (P).
Current yield = coupon payment/ percentage of the (current) bond price
Current yield = C / P0.
The financial terminology used in for other fixed-interest securities and bonds such as gilts are
flat yield, interest yield, running yield, the current yield, income yield. It is basically a ratio of bond's current clean price and the annual interest payment.
The current yield for this reason brings up to the yield of the bond at the current moment. It does not speculate the total return over the life of the bond. In specific manner, it does not take account of reinvestment risk i.e the uncertainty about the rate at which future cash flows can be reinvested. The fact that bonds normally mature at par value can be an significant element of a bond's return.
Relationship between coupon rate and yield to maturity
The idea of current yield is intimately associated with other bond concepts, including coupon yield and yield to maturity. When a bond deals at:
A discount: Yield to maturity > current yield > coupon yield
A premium: coupon yield > current yield >yield to maturity
A par: yield to maturity = current yield = coupon yield.
Thus, Current Yield = Total Yield - Capital Gains Yield. The current yield is the annual payment divided by the price. In an algebraic manner expressed as
Yield= The annual payment/ Price
Y = R/P
Here Y is the yield, R is the annual payment,and P is the price.
This conception displays the straight line between high and low returns over more than a period. A high yield will bring out a relative payment and a low yield will also do the same. When the yields of various periods are equated a higher yield will show a higher payment with low risk linked up. This compares to investors awaiting a higher yield over a length of investing. The possible action of market risks are neglected.
Current Yield - Online Tutoring - Assignment Assistance
We at Expertsmind.com offer Current Yield homework help, Current Yield tutorials and assignment help and Bond valuation based question's answers by help of qualified and experienced finance tutors. We make easy Current Yield assignments and homework for you with conceptual theory and by solving each kind of problems following a tricky approach.
ExpertsMind.com - Current Yield Assignment Help, Current Yield Homework Help, Current Yield Assignment Tutors, Current Yield Solutions, Current Yield Answers, Bond Valuation Assignment Tutors