The bond’s current yield is the annual interest payments divided by the price. The annual interest payments are the coupon interest times the par value or 5% * 1,000 or $50. The price of the bond is $990, so the yield is $50/$990 or 5.05%.

To calculate the yield to maturity, first clear the memories of the calculator and set it to annual payments. Set your Present Value as negative and what you would pay for the bond PV = -990, your interest payments as your payment, or PMT = 50, your future value as your par value, FV = 1,000, your number of years as 9 N=9, and solve for your interest rate, I = 5.14%.

Note: Since you paid less for the bond than par, and your coupon interest rate was 5 percent, which would increase your YTM.