Flat yield for bonds is calculated as which expression?

Flat yield for bonds is calculated as which expression?

• A. (price per £100 nominal / coupon) × 100
• B. (coupon / price per £100 nominal) × 100
• C. (coupon × price per £100 nominal) × 100
• D. (coupon / par) × 100

Answer: (B)

Flat yield shows the income you get from the bond relative to its current price. It’s the annual coupon payment per £100 of nominal value divided by the current price per £100, expressed as a percentage. So you take the coupon and divide it by the price per £100 nominal, then multiply by 100. That matches coupon / price per £100 nominal × 100. The other forms aren’t correct because they either invert the ratio, multiply values together, or use the par value instead of the actual market price.

Flat yield shows the income you get from the bond relative to its current price. It’s the annual coupon payment per £100 of nominal value divided by the current price per £100, expressed as a percentage. So you take the coupon and divide it by the price per £100 nominal, then multiply by 100. That matches coupon / price per £100 nominal × 100.

The other forms aren’t correct because they either invert the ratio, multiply values together, or use the par value instead of the actual market price.