Definition of Current Yield

Current Yield is a relationship between the annual income generated by a security relative to its current market price. The formula is Annual income / current market price.

Applying "Current Yield" to Securities Exams:

Many investors will purchase securities in an effort to receive the income generated by the security. How attractive an investment is in many cases will be determined by how much the investor must pay for the security to receive that income. The current yield will help the investor evaluate the income opportunity. As the price of the security increases the current yield will fall. If the price of the security declines the current yield will rise. There is an inverse relationship between the price of a security and its yield.

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