Nominal Interest Rate and Effective YieldWhen you go to a bank enquiring about the deposit rates, the rates specified by the bank can be expr...
Lessons
- What is Macaulay Duration?
- Duration of a Bond - Video
- Calculating the Macaulay Duration Using Excel
- Properties of Duration
- Modified Duration of a Bond
- Calculating Price and Yield of a Bond Using Zero Curve
- Price-Yield Relationship
- Current Yield of a Bond
- Basis Point Value (BPV / DV01)
- Quick Approximation of Price Value of a Basis Point (PVBP)
Current Yield of a Bond
Current Yield
The current yield of a bond measures the returns an investor can expect if he holds the bond for a period of one year. It is calculated as the annual interest received divided by the current price of the bond.
Current Yield = Annual Interest / Current Bond Price
The current bond price is the clean price of the bond.
One must note that the current yield represents the return from the bond at a particular time and does not represent the returns over the lifetime of the bond. The current yield also does not take into account the reinvestment risk.
Example:
Assume that a $100 par bond is currently trading at $95, and pays a coupon of 6%. The current yield will be given as follows:
Current yield = $6/$95 = 6.316%
You may find these interesting
Bond Duration and Convexity Simplified – Part 1 of...While analyzing bonds, it is important to apply the concepts of duration and convexity. Duration has...
Bond Duration and Convexity Simplified – Part 2 of...As we learnt in [part 1](https://financetrain.com/bond-duration-and-convexity-simplified-part-1-of-2...
Features of T-bond Futures and T-note FuturesTreasury bond futures and Treasury note futures traded on the CBOT have the following standard featu...
Duration of a Bond - VideoThis video provides an introduction to the bond concept and the steps involved in calculating it.
<...
Modified Duration of a BondModified duration indicates the percentage change in the price of a bond for a given change in yield...
Basics of Bond FundsBond mutual funds are such funds which specialize in investing in bonds and other debt securities. T...
Types of Bond FundsThere are three basic types of [bond funds](https://financetrain.com/basics-of-bond-funds/ "Basics o...
Storage, Convenience Yield, and Commodity PricesIn this article, we will understand the concepts of “storage” and “convenience” yield with reference...
Classification of Bond Indexing StrategiesThere are various kinds of bonds strategies which a person could adopt to get returns out of the bon...
Finance Train Premium
Accelerate your finance career with cutting-edge data skills.
Join Finance Train Premium for unlimited access to a growing library of ebooks, projects and code examples covering financial modeling, data analysis, data science, machine learning, algorithmic trading strategies, and more applied to real-world finance scenarios.
I WANT TO JOINJOIN 30,000 DATA PROFESSIONALS
Free Guides - Getting Started with R and Python
Enter your name and email address below and we will email you the guides for R programming and Python.
