Current yield represents the yield that a bond is paying at its current price rather than the total return over the life of the bond. Bondholders can calculate the current yield by dividing the sum of the bond’s interest payments each year by its current value excluding accrued interest.
For example, suppose that a $100 face value bond has a 5% coupon rate and is selling at $90. Bondholders can calculate the current yield by multiplying $100 by 5% to get $5 and then dividing that by $90 to get the current yield of about 5.6%.
