Glossary

Current yield/ flat yield

It is the ratio of the annual interest payment and the bond’s current clean price. The current yield only therefore refers to the yield of the bond at the current moment. It does not reflect the total return over the life of the bond. In particular, it takes no account of reinvestment risk (the uncertainty about the rate at which future cashflows can be reinvested) or the fact that bonds usually mature at par value, which can be an important component of a bond’s return. Clean price is the price of a bond excluding any interest that has accrued since issue or the most recent coupon payment
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