• The rate of annual income return on an investment, expressed as a percentage. Yield does not include capital gains. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.
• The yield is the rate of return that investors require from the bond. Equivalently, it is the rate of return that they require from bonds of similar risk.
• (1) The amount of interest paid on a bond or stock divided by the price; a measure of the income generated by the security. (2) The rate of return on an investment, usually expressed as an annual percentage rate. A yield is not a total return measure because it does not include capital gains or losses. See also: Current Yield; Dividend Yield; Nominal Yield.
• The percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note.
• Is the rate of return on an asset. It is frequently expressed as a percent of the current market price.
Follow this link for all the terms related to yield.
| ||Embedded terms in definition|
| ||Annual percentage rate|
Rate of interest
Rate of return
Yield to maturity
| ||Referenced Terms|
| ||Apy: Is the Annual Percentage Yield of Interest.|
| ||Arbitrage: The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets seldom exist.Strictly defined, buying something where it is cheap and selling it where it is dear; for example, a bank buys 3-month CD money in the U.S. market and sells 3-month money at a higher rate in the Eurodollar market. In the money market, often refers: (1) to a situation in which a trader buys one security and sells a similar security in the expectation that the spread in Yields between the two instruments will narrow or widen to his profit, (2) to a swap between two similar issues based on an anticipated change in yield spreads, and (3) to situations where a higher return (or lower cost) can be achieved in the money market for one currency by utilizing another currency and swapping it on a fully hedged basis through the foreign-exchange market.Is a form of trading which attempts to profit by discrepancies in price due to location, funding, volatility, communications, response to information, or other differences. Typically, the price differences are small and only the quickest, most cost efficient or funding efficient parties participate. Compare with Risk Arbitrage.|
| ||Arbitrage free option pricing models: Yield curve option-pricing models.|
| ||Attribute bias: The tendency of stocks preferred by the dividend discount model to share certain equity attributes such as low price-earnings ratios, high dividend Yield, high book-value ratio or membership in a particular industry sector.|
| ||Average dividend yield: Combined with price appreciation, the average dividend Yield (if any) can show a potential total return from a security investment. The formula for the average dividend yield is:|
(EPS *Average Payout) / current price
where EPS = Estimated Future High EPS / (1 + EPS Growth) 2.5
Companies that pay a dividend will generally increase the dividend as EPS grow. Share price growth will usually follow the dividend increases, and thus keep dividend yield at a constant percentage.
| ||Related Terms|