Traditional yield measures, Financial Management

Current Yield

Current yield is defined as the annual coupon interest received on the market price.

         Current Yield =  1237_current yield.png                

For example, the current market price of a bond is Rs.843 and the coupon interest payment received on it is Rs.70. The Current yield of the bond is:

         Current Yield = 70/ 843 = 0.83, which can also be expressed as 8.3%.

Current yield for a bond selling at par would be equal to the coupon interest rate. Current yield of a bond selling at a premium (discount) would be less (greater) than the coupon interest rate.

An important drawback of current yield is that it considers only coupon income as a source of return to the investor, ignoring interest and capital gains (loss) that would also accrue.

 Yield to Maturity (YTM)

It is the rate of return earned by an investor who purchases a bond and holds it till maturity. YTM is the discount rate which equals the present value of promised cash flows to the current market price/purchase price.

Posted Date: 9/10/2012 1:40:26 AM | Location : United States







Related Discussions:- Traditional yield measures, Assignment Help, Ask Question on Traditional yield measures, Get Answer, Expert's Help, Traditional yield measures Discussions

Write discussion on Traditional yield measures
Your posts are moderated
Related Questions
discuss the applicability of financial management in respect to poultry farming in uganda

Eatmore & Green Pty. Ltd (Australia) is a successful medium sized marketing consultancy for Australian agricultural products and Australian sourced organic, natural beauty/cosmetic

How can we measure Total return- Measuring the Rate of Return Total return can be defined as: Total returns = (Cash payment received + Price change over the period) / Purcha

applicability of an operating cycle in vegetable growing business

Treasury Inflation-Protected Securities (TIPS) are the inflation-indexed bonds, the US Treasury offers. The first offer was made in the year 1997. As the name sug


In all previous illustrations, we assumed that coupon payments are paid on annual basis. However, most of the bonds carry interest payment semi-annually. Semi-ann

Investing Surplus Cash : Cash not required for temporary periods of short durations can be invested in near-cash assets, i.e. marketable securities which are readily convertible in

Q. Explain about Centralised treasury function? Treasury departments are usually a feature of larger companies than Frantic although it is perhaps beneficial to consider the be

Using Southwest Airlines as an example, please identify the largest potential threat, the strategy employed, and what types of capital budgeting projects would be used to operation