What is the equation for calculating flat yield?

The equation for calculating flat yield is determined by taking the annual coupon payment and dividing it by the market price of the bond. This relationship demonstrates the yield an investor earns relative to the price they pay in the market for the bond.

When an investor purchases a bond, the yield indicates the return they can expect based on the current market conditions rather than the bond's par value. Using the market price in the denominator reflects how the yield can change with fluctuations in the price of the bond in the market. If a bond's market price decreases, the flat yield would increase, assuming the annual coupon payment remains constant, and vice versa.

This calculation is crucial for investors as it helps in assessing the attractiveness of a bond investment compared to other investment opportunities, considering the current market dynamics. The other options do not accurately represent the calculation necessary for determining flat yield, either using incorrect elements or reversing the relationship between the coupon and price.