Yield: Difference between revisions
imported>Doug Williamson (Added links to Forward, Zero coupon, Par yields) |
imported>Doug Williamson (Note expressly that the cost of borrowing is known as yield.) |
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The rate of return <i>on the current market value</i> of an asset or liability, usually expressed as a percentage per annum. | The rate of return (or cost) <i>on the current market value</i> of an asset (or liability), usually expressed as a percentage per annum. | ||
For example, today’s yield to maturity of a bond measures the total return to an investor in the bond, reflecting both (i) the interest income over the remaining life of the bond and (ii) any capital gain (or loss) from today’s market value to the redemption amount payable at maturity. | For example, today’s yield to maturity of a bond measures the total return to an investor in the bond, reflecting both (i) the interest income over the remaining life of the bond and (ii) any capital gain (or loss) from today’s market value to the redemption amount payable at maturity. | ||
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More broadly, any measure of a rate of return. | More broadly, any measure of a rate of return or borrowing cost. | ||
In this broader sense, yield may be calculated and expressed on a number of different bases. | In this broader sense, yield may be calculated and expressed on a number of different bases. | ||
Revision as of 13:45, 17 November 2015
1.
The rate of return (or cost) on the current market value of an asset (or liability), usually expressed as a percentage per annum.
For example, today’s yield to maturity of a bond measures the total return to an investor in the bond, reflecting both (i) the interest income over the remaining life of the bond and (ii) any capital gain (or loss) from today’s market value to the redemption amount payable at maturity.
When the market yield to maturity is applied to discount the future cashflows of the asset or liability, the net present value of all of the cashflows - including the current market purchase price - is Nil.
2.
Dividend yield.
3.
More broadly, any measure of a rate of return or borrowing cost.
In this broader sense, yield may be calculated and expressed on a number of different bases.
For this reason it is essential to identify clearly the basis on which a given yield is expressed, before using it for calculation or comparison.
See also
- Credit spread
- Discount instruments
- Discount rate
- Discount yield
- Dividend yield
- Interest
- Interest rate
- Liquidity
- Nominal annual rate
- Periodic rate of interest
- Periodic yield
- Security
- SLY
- Sterling commercial paper
- Yield spread
- Yield to maturity
- Forward yield
- Zero coupon yield
- Par yield
