Current Yield

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DEFINITION of 'Current Yield'

Annual income (interest or dividends) divided by the current price of the security. This measure looks at the current price of a bond instead of its face value and represents the return an investor would expect if he or she purchased the bond and held it for a year. This measure is not an accurate reflection of the actual return that an investor will receive in all cases because bond and stock prices are constantly changing due to market factors.
 


Current Yield

Also referred to as "bond yield", or "dividend yield" for stocks.

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BREAKING DOWN 'Current Yield'

For example, if a bond is priced at $95.75 and has an annual coupon of $5.10, the current yield of the bond is 5.33%. If the bond is a 10-year bond with nine years remaining and you were only planning to hold it for one year, you would receive the $5.10, but your actual return would depend on the bond's price when you sold it. If, during this period, interest rates rose and the price of your bond fell to $87.34, your actual return for the period would be -3.5% (-$3.31/$95.75) because although you gained $5.10 in dividends, your capital loss was $8.41.

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RELATED FAQS
  1. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  2. What is the difference between the yield of stock and the yield of a bond?

    Yield is a term frequently used in the area of investing but often not completely understood by individual investors. The ... Read Full Answer >>
  3. Are high-yield bonds better investments than low-yield bonds?

    Most bonds typically make periodic payments, known as coupon payments, to the bondholder. A bond's indenture, which will ... Read Full Answer >>
  4. Can a bond have a negative yield?

    The return a bond provides to an investor is measured by its yield, which is quoted as a percentage. Current yield is a commonly ... Read Full Answer >>
  5. Do penny stocks pay dividends?

    Because of the small market capitalization and revenues typical of most penny stocks, there are very few that offer dividends. ... Read Full Answer >>
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    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>

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