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effective yield |
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Effective yield Yield or return on a short-term investment after adjustment for the change in exchange rates over the period of concern. Annual Percentage Yield The yield on an investment in one year, taking into account the effects of compounding. For example, if one has a fixed-income investment such as certificate of deposit that pays 3% in interest each month, the annual percentage yield is more than 3% because compounding the interest results in a (slightly) higher return each month. In this example, the annual effective yield is calculated thus: Annual percentage yield = (1.03)^12 - 1 = .43 = 43%, where 1.03 is 1 plus the monthly interest and 12 is the number of times in a year interest is compounded. It is also known as the annual effective yield. effective yield A calculation of the return on an investment that considers the price paid,the time held,and the interest received. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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