This is the yield or return derived by the investor on purchase of the instrument (yield related to purchase price)

It is calculated by dividing the coupon rate by the purchase price of the debenture. For e. g: If an investor buys a 10% Rs 100 debenture of ABC company at Rs 90, his current Yield on the instrument would be computed as:

Current Yield = (10%*100)/90 X 100, = 11.11% p.a.

The current yield calculation is very simple but the drawback in the method is that it does not consider the time value of money, which is why the YTM or the yield to maturity becomes a lot more useful.

Juvina Maggieanswered.This is the yield or return derived by the investor on purchase of the instrument (yield related to purchase price)

It is calculated by dividing the coupon rate by the purchase price of the debenture. For e. g: If an investor buys a 10% Rs 100 debenture of ABC company at Rs 90, his current Yield on the instrument would be computed as:

Current Yield = (10%*100)/90 X 100, = 11.11% p.a.

The current yield calculation is very simple but the drawback in the method is that it does not consider the time value of money, which is why the YTM or the yield to maturity becomes a lot more useful.