Current Yield

What Does Current Yield Mean?

Yield refers to the actual rate of return to the issuer of a security over a specified time period. Current yield is the annual income divided by the current price of the security. This financial term is commonly used in reference to bonds and other fixed-interest securities. The current yield focuses on the current value of a bond, rather than its face value. Investors who buy bonds for their portfolios often weigh current yield against returns from other income-generating products, including the cash value built up inside an indexed universal life insurance policy.

Insuranceopedia Explains Current Yield

The current yield is the ratio of the annual interest payment to the market price of the security. It is used to estimate the return an investor can expect, though it may not provide an entirely accurate reflection due to the various factors that influence the market. Current yield is also worth comparing against the payout rates of annuities, since both give investors an income stream tied to interest rates.

To calculate the current yield, divide the annual cash inflow (interest payment) by the market price of the security.