Yield Legal Terms

For bonds, a yield to maturity is a complex calculation that reflects the total return an investor would receive from a bond if the bond were held to maturity and interest payments were reinvested at the same rate. It takes into account the purchase price, coupon yield, maturity period and time between interest payments. A net return is the return on an investment after deducting all costs, losses and expenses associated with the investment. A dividend yield is the current annual dividend divided by the market price per share. A yield spread refers to the differences in yield between different securities issuances. A nominal return is the annual income of a fixed-income security divided by the face value of the security. It is expressed as a percentage. For example, if a security with a par value of $5,000 generates $500 in income, the nominal return is 10%. There are several types of specific yields. For bonds, a current yield is the interest paid annually divided by the current market price of the bond. When interest rates fall, the market price of the bond rises; When bond prices rise, they fall. The current yield reflects the actual return on a bond. For example, a 9.5% bond with a face value of $1,000 yields $95 per year.

If this bond is purchased on the secondary bond market for $1,100, the interest will still be $95 per year, but the current yield will be reduced to 8.6% because the new owner paid more for the bond. The forward return is the proportional rate that the income from an investment brings to the total cost of the investment. For example, a profit of ten dollars on an investment of one hundred dollars corresponds to a return of 10%. For example, the yield on stock dividends or bond interest paid is expressed as a percentage of the current price. A yield can also refer to the bond coupon or the stock dividend rate divided by the purchase price. The current return on an investment or expense as a percentage of the price of the investment or expense. A brief definition of return: the ratio between the income from an investment and the total cost of the investment over a given period.