A bond's current yield is calculated as:

Question

Quizplus · Accepted Answer

The current yield is calculated by dividing the annual interest payment by the bond's current price. This indicates the return an investor can expect to earn in the form of interest payments from the bond's current price. Choice A is incorrect because it divides the annual interest payment by the bond's market yield, which is not a measure used in calculating current yield. Choice B is incorrect because it divides the annual interest payment by the bond's face value, which does not account for any changes in the bond's market price. Choice D is incorrect because it divides the par value (face value) by the bond's current price, which is not a measure used in calculating current yield.

A Bond's Current Yield Is Calculated As