The current yield on a bond is equal to ________.
A) the internal rate of return
B) the yield to maturity
C) annual interest divided by the par value
D) annual interest divided by the current market price
E) none of these

Question

Quizplus · Accepted Answer

The current yield on a bond is calculated by dividing the annual interest payment by the current market price of the bond. It is not the internal rate of return or the yield to maturity, although these measures are also important to bond investors. The current yield is unique because it takes into account the actual price that an investor paid for the bond, which may be different from the bond's par value or face value.

The Current Yield on a Bond Is Equal to ________