In
securities, the minimum acceptable
yield at a given level of
risk. Different
investors have different reasons for choosing their required yields. Normally, a person's or institution's
cost of capital determines it. For example, an investor may also carry a
debt with a high
interest rate; if an
investment does not meet a required yield, it would make more sense for the investor to pay down his/her debt. The required yield is also related to the amount of risk an investor is willing to accept. One with a
portfolio consisting largely of
bonds will generally have a lower required yield than one whose portfolio contains mainly
stocks. See also:
Markowitz Portfolio Theory.