The Current Yield Calculator gives you the interest rate based on the current market value of the bond instead of the face value. Many bonds pay interest twice per year, normally as a fixed dollar amount. The coupon interest rate is the total annual interest payment divided by the face value of the bond. However, most bonds are not traded at face value. A bond with a face value of $1,000 might well be bought or sold at $950 or $1050.
You’ll need to put in the following information so that the current yield calculator can then display the figure for the income generated:
Bond Face Value: Put in here the amount you will get for your bond when it matures.
Coupon Rate (%): Enter the bond’s coupon rate (interest rate) into the current yield calculator.
Market Price: Enter the price at which you could sell the bond on the open market today.
Current Yield: When you’ve entered in the data above in the current yield calculator and clicked on “Calculate”, this is the result.
Current yield is not necessarily the best measure of the total return for buying a bond. You may have paid above or below the face value when you bought the bond, but the calculator does not include any gain or loss to you when you redeem the bond at maturity. Nor does the calculation include impact of compounding the interest payment, meaning the gains you would get from re-investing the interest rate payments.