1. What is Current Yield?

The current yield is a measure of the annual income (interest or dividends) an investment provides relative to its current market price. For Treasury bonds, it represents the annual coupon payment divided by the bond's market price.

2. How Does the Calculator Work?

The calculator uses the current yield formula:

Where:

• \( C \) — Annual coupon payment ($)
• \( P \) — Current market price of the bond ($)

Explanation: The formula calculates the annual return on investment based on the bond's current market price, not its face value.

3. Importance of Current Yield

Details: Current yield helps investors compare bonds with different coupon rates and market prices. It's particularly important for 30-year Treasury bonds as it reflects the income return at current market conditions.

4. Using the Calculator

Tips: Enter the annual coupon payment in dollars (typically fixed for Treasury bonds) and the current market price (which fluctuates). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is this different from yield to maturity?
A: Current yield only considers the annual coupon payments, while yield to maturity accounts for all future cash flows including the principal repayment at maturity.

Q2: Why does the market price differ from face value?
A: Bond prices fluctuate based on interest rate changes. When rates rise, bond prices fall, and vice versa.

Q3: What's a typical coupon rate for 30-year Treasuries?
A: Coupon rates vary but are typically between 1-5% depending on when the bond was issued and current interest rates.

Q4: How often do Treasury bonds pay coupons?
A: U.S. Treasury bonds pay interest semiannually, but the calculator uses the annual total.

Q5: Does this account for inflation?
A: No, this is the nominal yield. For real yield, you'd need to consider inflation expectations.