- Finthe annual return on a bond (the rate of interest) expressed as a percentage of the current market price of the bond. Bonds can tie up investors’ money for periods of up to 30 years, so knowing their yield is a critical investment consideration.EXAMPLEBond yield is calculated by multiplying the face value of the bond by its stated annual rate of interest, expressed as a decimal. For example, buying a new ten-year $1,000 bond that pays 6% interest will produce an annual yield amount of $60:1,000 × 0.060 = 60The $60 will be paid as $30 every six months. At the end of ten years, the purchaser will have earned $600, and will also be repaid the original $1,000. Because the bond was purchased when it was first issued, the 6% is also called the “yield to maturity.”This basic formula is complicated by other factors. First is the “time-value of money” theory: money paid in the future is worth less than money paid today. A more detailed computation of total bond yield requires the calculation of the present value of the interest earned each year. Second, changing interest rates have an impact on bond trading and, ultimately, on yield. Changes in interest rates cannot affect the interest paid by bonds already issued, but they do affect the prices of new bonds.
The ultimate business dictionary. 2015.
Look at other dictionaries:
bond yield — USA bond yield, Also referred to as yield. One of several numbers describing the annual interest rate paid by a bond: • coupon refers to the annual interest rate paid by a bond that is expressed as a percentage of its par value. This coupon rate… … Law dictionary
bond yield — ➔ yield1 * * * bond yield UK US noun [C] FINANCE ► money that is earned from a bond, for example from the interest paid: »The bond yield earlier in the week touched 6.40% … Financial and business terms
bond yield — Rendimento di una obbligazione Il bond yield è il tasso d interesse determinabile come rapporto tra il valore della cedola e il prezzo d acquisto dell obbligazione. Da evidenziare che il prezzo di acquisto della obbligazione non coincide con… … Glossario di economia e finanza
bond yield — See yield … Black's law dictionary
Bond yield — The rate of return on a bond calculated using the purchase price and the coupon rate … International financial encyclopaedia
bond yield — / bɒnd ji:ld/ noun income produced by a bond, shown as a percentage of its purchase price … Dictionary of banking and finance
equivalent bond yield — See bond equivalent yield. American Banker Glossary effective annual yield on a short term, noninterest bearing security calculated for comparison to yields quoted on coupon securities. Bloomberg Financial Dictionary … Financial and business terms
equivalent bond yield — Fin see bond equivalent yield … The ultimate business dictionary
Equivalent bond yield — Annual yield on a short term, non interest bearing security calculated so as to be comparable to yields quoted on coupon securities. The New York Times Financial Glossary … Financial and business terms
yield — 1 / yēld/ vt: to produce as return from an expenditure or investment: furnish as profit or interest an account that yield s 6 percent vi 1: to give place or precedence (as to one having a superior right or claim) 2: to relinquish the floor of a… … Law dictionary