|
|
Bond yield |
|
|
|
 Home Site Map Add Term Search About Us Contributors |
Bond yieldYield calculations on bonds aim to show the return on a gilt or bond as a percentage of either its nominal value or its current price. There are three types of yield calculation that are commonly used:Nominal Yield (also known as 'flat yield')This is calculated by dividing the annual income on the bond by its nomina or 'par' value. So the nominal yield on a £100 bond which pays 5% interest per year is 5/100 x 100 = 5%.Current or 'Running Yield'This is calculated by dividing the annual income on the bond by its current market price. So if the market price of the £100 bond dropped to £95, the current yield on the bond at that time would be 5/95 x 100 = 5.36%. Note that as the market price of a bond drops, its yield goes up.Redemption Yield'The Redemption Yield shows what the total return on a bond would be if held to its maturity date. It reflects not only the interest payments a bondholder will receive, but also the gain/loss he will make when it matures. The income element is the same 'current yield' calculation performed above. The gain/loss element is calculated by taking the difference between the current market price and the nominal value of the bond (e.g. in our example 100 - 95 = 5), dividing it by the number of years til maturity (assume 5 years for simplicity, so 5/5 = 1) and then dividing that figure by the current price of the bond (1/95 x 100 = 1.05%) The yield to redemption is the sum of the current yield (5.36%) and the capital yield (1.05%) = 6.41%.Similar MatchesYieldYieldSee: 'dividend yield' and 'bond yield'. Bond equivalent yieldBond equivalent yieldBond yield calculated on an annual percentage rate method. Differs from annual effective yield. Yield curveYield curveA curve which plots current yields of fixed interest securities against their times to redemption (maturity). This enables investors to compare the yields of short, medium and long term securities at a given time. Effective annual yieldEffective annual yieldAnnualized interest rate on a security computed using compound interest techniques. Holding Period Yield (HPY)Holding Period Yield (HPY)The annual rate of return actually realized on an investment in a bond. Further SuggestionsYield spreadEquivalent bond yield Negative yield curve Yield differential or pickup flat yield Net yield Money market yield Tax equivalent yield Relative yield spread Yield advantage dividend yield yield gap Corporate equivalent yield Realized yield Constant yield method High yield Nominal yield Yield Annual percentage yield (APY) Yield burning Current yield Yield to average life yield to maturity Expected dividend yield Yield equivalence |
|
|
|