CURRENT YIELD Meaning and
Definition
-
Current yield is a financial metric used to measure the return generated by an investment, particularly fixed-income securities such as bonds and notes. It represents the annual income or interest earned by an investor in relation to the current market price of the security.
The current yield is calculated by dividing the annual interest or coupon payment by the market price of the bond and expressing the result as a percentage. This yield does not consider any potential capital gains or losses that may be incurred upon selling the security.
For example, if an investor owns a bond with a face value of $1,000 and an annual coupon payment of $50, and the current market price of the bond is $900, the current yield will be calculated as follows:
Current Yield = Annual Coupon Payment / Market Price of Bond
Current Yield = $50 / $900
Current Yield = 0.0556 or 5.56%
In this case, the current yield would be 5.56%. This indicates that the bond is generating an annual income of 5.56% of its market price. Higher current yields imply a higher rate of income in relation to the price of the security.
It is important to note that the current yield does not take into account any potential fluctuations in the market price of the security and therefore may not provide a complete picture of the investment's overall return.
Common Misspellings for CURRENT YIELD
- xurrent yield
- vurrent yield
- furrent yield
- durrent yield
- cyrrent yield
- chrrent yield
- cjrrent yield
- cirrent yield
- c8rrent yield
- c7rrent yield
- cuerent yield
- cudrent yield
- cufrent yield
- cutrent yield
- cu5rent yield
- cu4rent yield
- cureent yield
- curdent yield
- curfent yield
- curtent yield
Etymology of CURRENT YIELD
The word "current yield" is a combination of the words "current" and "yield".
The term "current" is derived from the Latin word "currere", which means "to run". Over time, it came to mean "flowing" or "currently existing". In the context of "current yield", the term refers to the current flow or level of income generated by an investment.
The word "yield" has an etymology traced back to the Old English word "gieldan", which means "to pay, grant, or lend". It evolved to acquire the meaning of "produce" or "give forth" in the context of crops, products, or returns. In finance, the term "yield" represents the income or return generated by an investment.
So, when combined, "current yield" refers to the immediate income or return generated by an investment at a specific period, typically expressed as a percentage.
Infographic
Add the infographic to your website:
