The current yield on a bond can be either higher or lower than its coupon rate of return.

Question

Quizplus · Accepted Answer

The current yield on a bond depends on its market price, which can fluctuate based on factors such as interest rates, credit ratings, and market demand. Therefore, the current yield can be different from the bond's coupon rate, which is the fixed rate of return stated in the bond's contract. If the market price of the bond rises, its current yield will be lower than its coupon rate, and vice versa.

The Current Yield on a Bond Can Be Either Higher