A bonds current yield is always based on its face value or purchase price not on its face value or purchase price or the price at which it later trades. However, the total return, consisting of both current income and capital gains, is affected by the price at which the bond is later sold (if the bond is sold before it matures) or the bonds face value (if the bond is held until it matures).

19. Current yield of a bond A bond's current yield equals the bond's fixed annual interest payment divided by its bond price. It is a measure of the current annual income (the total of both semiannual interest payments in dollars) expressed as a percentage when divided by the bond's current market price. You can calculate a bond's current yield with the current yield formula as follows: Current Yield =CurrentMarketPriceCurrentAnnualIncome Consider the following example: Suppose that Heidi Harris paid $880 for a $1,000 bond paying $45 per year in interest. Calculate the current yield of Heidi's bond at the current market price of $880. Round your answer to the nearest 1/100th of a percent. Current yield = Current Annual Income / Current Market Price = = A bond's current yield is always based on its , not on its or the price at which it later trades. However, the total return, consisting of both current income and capital gains, is affected by the price at which the bond is later sold (if the bond is sold before it matures) or the bond's face value (if the bond is held until it matures)