Calculate Adjusted Current Yield
The adjusted current yield formula takes into account the discount or premium at which the investor bought the bond.
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Interpretation:
A bond with a $100 par value that pays $#PValue# coupons and has a market value of $#Price# will have an adjusted current yield of #Yield#%, provided the bond is held until #MDate#. " >So what does this tell you? Adjusted current yield takes into account the additional capital gain or loss realized, on top of coupon payments, from holding a bond priced at a premium or discount until maturity. A bond with a price less than $100 is priced at a discount, which will make the adjusted current yield higher than current yield. A bond with a price greater than $100 is priced at a premium and will therefore have a lower adjusted current yield.
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Related Links:
- Understanding the Time Value of Money - Find out how time really is money by learning to calculate present and future value.
- Advanced Bond Concepts - This detailed tutorial explains some of the more complex concepts and calculations you need to know for trading bonds, including bond pricing, yield, term structure of interest rates, duration, and much more.