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**CFA Practice Question**

Calculate the current yield for a 7% 8-year bond whose price is $94.17.

A. 7.43%

B. 7.72%

C. 3.72%

**Explanation:**The current yield relates the annual dollar coupon interest to the market price. In this case current yield = 7 / 94.17 = 7.43%. The current yield will be greater than the coupon rate when the bond sells at a discount; the reverse is true for a bond selling at a premium. For a bond selling at par, the current yield will be equal to the coupon rate.

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**User Contributed Comments**
13

User |
Comment |
---|---|

Sheikh |
current yield is calculated in a very differnt way... ha, can you believe it - 7/94.17 - !? |

humphrey |
is current yield same as YTM? in that case the answer is nonsense. |

kevin |
Current Yield = annual dollar coupon interest / price Sheikh: what's wrong with the answer?!! |

shasha |
it's not YTM. don't know what's wrong with the formula. i did it same way. |

swift |
AnalystNotes rocks!! no blasphemy please - the answer and the explanation are perfect beyond reproach!! |

DAS11 |
Current yield is not Yield to Maturity |

vikram59 |
good question..this drove me crazy! |

Dinosaur |
sneaky sneaky |

dlukas |
I almost threw my calculator out the window. If they were really smart they would have put the YTM as one of the answers... I would have picked it and bet my balls on having the right answer. Maybe just the left one. |

kellyyang |
This is so so so easy question, why guys stuck it! We know CY=PMT/Price PMT=Face value * CR=100*7%=7 Cy=7/94.17=7.43% |

madelinee |
OMG! |

anavaza |
Current Yield should be for the semester in stead of an anual basis? the coupon aren`t semestral? |

pigletin |
if you think current yield is YTM, chances are you will not pass the exam |