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Gross redemption yield |
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Gross redemption yieldSee 'redemption yield'.Similar MatchesRedemption cushionRedemption cushionThe percentage by which the conversion value of a convertible security exceeds the redemption price (strike price). Preferred equity redemption stock (PERC)Preferred equity redemption stock (PERC)Preferred stock that converts automatically into equity at a stated date. A limit is placed on the value of the shares the investor receives. RedemptionRedemptionRepayment of a debt security or preferred stock issue, at or before maturity, at par or at a premium price. Mandatory redemption scheduleMandatory redemption scheduleSchedule according to which bond sinking fund payments must be made. Redemption yieldRedemption 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 YieldThis is calculated by dividing the annual income on the bond by its nominal 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%. Further SuggestionsRedemption feeredemption price Redemption charge redemption fees Redemption Redemption price Redemption penalties Right of redemption redemption date right of redemption Redemption Extended redemption penalty Redemption penalty overhang Redemption statement Serial redemption Redemption date redemption Redemption Period Overhanging redemption penalty |
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