Municipal Bond Forum
Coupon rate, current yield
Q
I’m new to your site and have found it very educational. What is the difference between the coupon rate and the current yield? Which one determines the amount earned?
A
James A. Klotz responds:
The coupon rate reflects the amount of interest paid annually based on the face amount of the bond (par value).
The current yield is computed by dividing the dollar price into the coupon. Example: A 5% coupon selling at a price of 105.00 has a current yield of 4.76% (5.00 divided by 105 = 4.76).
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