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Yield
In finance in general, yield is the rate of annual return for an investment, expressed as a percentage.
When referring to stocks, yield is a rate of income generated from the security, obtained in the form of dividend and expressed as percentage. Yield is calculated by dividing annual dividend payments by stock’s current share price. Investors seek to enter those bonds that pay large annual dividends for relative small share price.
When talking about bonds, yield is the rate of interest paid per bond, and is calculated by dividing coupon rate by current bond market price. Bonds are issued with coupons with fixed payments, but later, bond’s yield is related inversely to its price. If the price of a bond declines, its yield goes up, and if interest rates in general decline (including yields) price of the bond goes up.
| Related Terms: Corporate Bond Tax-Equivalent Yield Flat Yield Curve Indicated Yield Negative Carry Negative Yield Curve Net Yield Normal Yield Curve Positive Yield Curve Treasury Note |