EachCalculatorBond Yield Calculator
Calculate a bond's current yield, and an approximate yield to maturity (YTM), from its price, coupon, and time remaining.
Current Yield
5.26%
Approx. Yield to Maturity
5.64%
How It Works
Current yield
Current yield = annual coupon payment ÷ current market price — a simple snapshot of income relative to what you'd pay today, ignoring any gain or loss at maturity.
Approximate yield to maturity
YTM also accounts for the difference between the bond's price and its face value, spread over the years remaining until maturity — a more complete (though still approximate) picture of total return.
Example Calculation
A bond with a $50 annual coupon trading at $1,000 (its face value) has a 5% current yield. If it traded at $950 instead, both the current yield and the approximate YTM would be higher.
Common Mistakes
- Using current yield alone to judge a bond's total return — it ignores any gain or loss you'd realize if you hold to maturity at a price different from face value.
- Treating the approximate YTM formula as exact — precise YTM requires solving an equation iteratively; this is a widely used estimate.
Frequently Asked Questions
- Why would a bond trade below its face value?
- Bond prices move inversely to interest rates — when market rates rise above a bond's coupon rate, its price falls so that its effective yield stays competitive with new bonds.
- Is YTM the same as the coupon rate?
- Only when the bond trades exactly at face value. Otherwise, YTM reflects the total return an investor would earn holding the bond to maturity, accounting for the price paid.