Legal Definitions - coupon yield

Coupon yield refers to the annual interest paid on a security, such as a bond, divided by the security's par value. It is also known as nominal yield.

• Current yield: The annual interest paid on a security divided by the security's current market price.
• Discount yield: The yield on a security sold at a discount.
• Earnings yield: The earnings per share of a security divided by its market price.
• Net yield: The profit or loss on an investment after deducting all appropriate costs and loss reserves.

If a bond has a par value of $1,000 and pays an annual interest of $50, then the coupon yield is 5% ($50/$1,000).

For a bond that is currently trading at $900 and pays an annual interest of $50, the current yield is 5.56% ($50/$900).

If a bond is sold at a discount for $950 and pays an annual interest of $50, the discount yield is 5.26% ($50/$950).

If a stock has earnings per share of $5 and is trading at $100, the earnings yield is 5% ($5/$100).

If an investment generates a profit of $1,000 after deducting all costs and loss reserves, and the initial investment was $10,000, then the net yield is 10% ($1,000/$10,000).

These examples illustrate how coupon yield is calculated and how it differs from other types of yield.