### 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.

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%