How this calculator works
A bond's coupon rate is stated as an annual percentage of its face value. The issuer pays that amount split across the coupon dates, so a 5% coupon on a $1,000 face value pays $50 a year in total: $25 each time if payments are semi-annual. The payment is fixed in currency and does not change when the bond's market price moves. The current yield divides the annual coupon by the market price to show the income return at today's price. It is not the yield to maturity, because it ignores the gain or loss between price and redemption.
Formula
Coupon per period = face value x annual coupon rate / payments per year. Annual coupon = coupon per period x payments per year. Current yield = annual coupon / market price.
Worked example
A $1,000 bond with a 5% coupon paid semi-annually pays $1,000 x 0.05 / 2 = $25 every six months, or $50 a year. At a market price of $950 the current yield is 50 / 950 = 5.2632%.
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Frequently asked questions
Does the coupon payment change if the bond price changes?
No. The coupon is fixed by the bond's terms and is calculated on face value. The market price changes the current yield, not the cash payment.
What is the difference between coupon rate and current yield?
The coupon rate is fixed relative to face value. Current yield is the annual coupon divided by the price you pay, so it rises when the price falls.
Can a coupon be paid monthly?
Some bonds, particularly in some domestic markets and for certain savings products, pay monthly. Choose the frequency that matches the bond's terms so the per-period amount is right.