Current yield of a bond is determined by which calculation?

The current yield of a bond is calculated by taking the bond's annual income, which typically comes from the interest payments it generates, and dividing that by the bond's current market price. This calculation provides investors with a measure of the bond's profitability relative to what it is currently worth in the market, rather than its face value or par value.

This measure is particularly useful because bond prices fluctuate due to interest rate changes and market conditions, and the current yield reflects the actual return an investor can expect if they purchase the bond at its present market price. The higher the current yield, the more attractive the bond can be to potential investors, especially in comparison to other investment options available.

The options that focus on face value or other calculations do not accurately reflect the income-return relationship relevant to current market conditions, making them less applicable in determining the bond's current yield.