Annual dollar coupon interest divided by current market price. Current Yield differs from coupon rate that expresses interest as an annual percentage of face value. For example, a bond with an 8 1/2% coupon will pay $8.50 per $100 of the face amount per year regardless of what the market price of the bond is at. However, if the bond were selling at $92, the current yield would be 9.239%. The general formula is:

Current Yield = Annual Dollar Coupon/Current Market Price

In this example, the current yield is higher than the coupon rate because the current market price of the bond is lower than the face value. The coupon payments remain the same regardless of the price paid for the bond. Since it takes less money to earn the same return, the yield goes up. Similarly, if the market price is higher than the face value, the current yield goes down because it would take more money to earn the same coupon rate.