Yield

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Yield

Current return from an investment or expenditure as a percentage of the price of investment or expenditure.

The term yield is the proportionate rate that income from an investment bears to the total cost of the investment. For example, a ten dollar profit on a one hundred dollar investment represents a 10 percent yield. Thus, a yield for stock dividends or bond interest paid will be expressed as a percentage of the current price. A yield can also refer to the bond coupon or stock dividend rate divided by the purchase price.

There are several specific types of yields. On bonds, a current yield is the annual interest paid divided by the current market price of the bond. As interest rates fall, the market price of the bond rises; as they rise, bond prices fall. The current yield reflects the actual rate of return on a bond. For example, a 9.5 percent bond with a face value of $1,000 yields $95 per year. If this bond is purchased in the secondary bond market for $1,100, the interest will still be $95 a year, but the current yield will be reduced to 8.6 percent because the new owner paid more for the bond.

A nominal yield is the annual income received from a fixed-income security divided by the face value of the security. It is stated as a percentage figure. For example, if a security with a face value of $5,000 generated $500 in income, the nominal yield would be 10 percent.

On bonds, a yield to maturity is a complex calculation that reflects the overall rate of return an investor would receive from a bond if the bond is held to maturity and the interest payments are reinvested at the same rate. It takes into account the purchase price, the coupon yield, the time to maturity, and the time between interest payments.

A net yield is the rate of return on an investment after deducting all costs, losses, and charges for investment. A dividend yield is the current annual dividend divided by the market price per share of stock. A yield spread refers to differences in yields between various issues of Securities.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
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Yield on the key 10-year Treasury note took a curve for the worst, plunging to its lowest level against the two-year yield since 2007 and stoking fears of an imminent economic recession.
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There is a consensus in literature that short-term interest rates in the economy are normally influenced by the monetary policy stance of the central bank, while long-term interest rates are believed to reflect market views on evolving macroeconomic conditions, particularly market expectations about output growth, inflation expectations, credit risks and expected real yields. The rationale is that financial variables are inherently forward looking as they rapidly assimilate developments in various sectors of the economy, which are usually not observable on real time basis.
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