| yield The percentage return on an investment. A given investment can have a variety of yields because of the many methods used to measure yield. For example, a bond's yield may be stated in terms of its returns if held to maturity, if held to the call date, or if held to the put date; or the yield may be calculated simply on the basis of the interest the bond pays compared with its current market price. Also called return. See also current yield, dividend yield, yield to average life, yield to call, yield to maturity, yield to put. |
Yield. Yield is the rate of return on an investment expressed as a percent.
Yield is usually calculated by dividing the amount you receive annually in dividends or interest by the amount you spent to buy the investment.
In the case of stocks, yield is the dividend you receive per share divided by the stock's price per share. With bonds, it is the interest divided by the price you paid. Current yield, in contrast, is the interest or dividends divided by the current market price.
In the case of bonds, the yield on your investment and the interest rate your investment pays are sometimes, but by no means always, the same. If the price you pay for a bond is higher or lower than par, the yield will be different from the interest rate.
For example, if you pay $950 for a bond with a par value of $1,000 that pays 6% interest, or $60 a year, your yield is 6.3% ($60 ÷ $950 = 0.0631). But if you paid $1,100 for the same bond, your yield would be only 5.5% ($60 ÷ $1,100 = 0.0545).
A measurement of the rate of earnings for an investment.
What Does Yield Mean?
The income return on an investment; the interest or dividends an investor receives from a security. Yield usually is expressed annually as a percentage of an investment's cost, its current market value, or its face value. Bond yield is calculated as shown here.
Investopedia explains Yield
This seemingly simple term often perplexes investors. For example, if an investor bought a stock at $30 (cost basis) and its current price rose to $33 with an annual dividend of $1, the “cost yield” would be 3.3% ($1/$30); however the “current yield” would be 3% ($1/$33). Bonds have four types of yields: (1) coupon yield (the bond interest rate fixed at issuance), (2) current yield (the bond interest rate as a percentage of the current price of the bond), (3) yield to maturity (an estimate of what an investor will receive if the bond is held to its maturity date), and (4) for tax-free municipal bonds, a taxequivalent (TE) yield (determined by the investor's tax bracket). Mutual fund yields are an annual percentage measure of income (dividends and interest) earned by the fund's portfolio, net of the fund's expenses. An SEC yield is the percentage yield on a mutual fund based on a 30-day period.
Related Terms:
• Annual Percentage Yield—APY
• Current Yield
• Dividend Yield
• Yield Curve
• Yield to Maturity—YTM
How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content.
| ?Page tools | ||
|---|---|---|
|