What is a Yield?
How to calculate Yield
In general, yield is calculated as follows:
The term yield may refer to slightly different aspects of a return for variable types of investments. For example, a yield on bonds, such as the coupon yield is the annual interest paid on the principal amount of the bond. Current yield is the coupon yield on a bond at a specific point in the time before the bond maturity. A yield to maturity of a bond is the internal rate of return on a bond's cash flow, including the cost of the bonds, period payments from the bonds, if any, and the return of the principal at redemption.
[Use our to measure your annual return if you hold a particular bond until its first Calculatorcall date.]
In equities, yields on preferred shares are similar to bond yields. For example, the dividend yield is the total payments in a year from the preferred shares divided by the principal value of the preferred shares. The current yield refers to the annual payments divided by the current market price.
Why do Yields matter?
While yields of various investments do not explain the reasons for the gains and losses, they may mask declines in the underlying value of the assets or the effects of inflation. Using the yield is a convenient way of comparing the returns on various financial investments.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
“You can’t time the market.” -- The first and last rule of...Read More →
Heads up: When you and your spouse fight about where to buy your next house, you're not really fighting about where to buy your next house. You're fighting about the ...Read More →
Many investors count on compounding to help them achieve financial independence. Yet many people confuse it for "average return." Brokers (who often quote the latter) don’t help the matter either...Read More →
As hackers continue to perfect their craft, credit card fraud continues to be an easy way for crooks to get fast cash. But there's one kind of fraud that's potentially much more dangerous...Read More →