Bond Yields
A bond with a 5% coupon trading at 95 has a current yield of:
Current yield = Annual Interest / Price. Discount = CY > coupon. Premium = CY < coupon.
Complete Analysis & Legal Rationale
Current Yield = Annual Interest / Market Price = $50 / $950 = 0.0526 = 5.26%. When a bond trades at a discount, current yield exceeds the coupon rate.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
4.75% would be below the coupon rate, which is impossible for a discount bond.
5.00% is the coupon rate, not the current yield.
Matches the verified teaching point in the explanation.
5.50% is not the correct calculation.
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.