The formula to calculate the Bond Current Yield is:
\[ \text{Current Yield} = \frac{\text{Annual Coupon}}{\text{Bond Price}} \]
Bond Current Yield measures the annual income (interest or dividends) divided by the current price of the security. It helps investors understand the return on investment for a bond purchased at the current market price.
Let's assume the following for Bond A:
Step 1: Calculate the annual coupon:
\[ \text{Annual Coupon} = \text{Coupon Payment per Period} \times \text{Coupon Frequency} = 25 \times 2 = $50 \]
Step 2: Determine the bond price:
The bond price is given as $900.
Step 3: Calculate the current yield using the bond current yield formula:
\[ \text{Current Yield} = \frac{\text{Annual Coupon}}{\text{Bond Price}} = \frac{50}{900} \approx 5.56\% \]
Therefore, the current yield for Bond A is approximately 5.56%.
