A yield refers to the return on investment generated by an asset, typically expressed as a percentage. It represents the income or profit earned from an investment relative to its cost or current market value. Yield is an important metric used by investors to assess the potential return and value of an investment.
There are different types of yield depending on the asset class or investment instrument. The most common types include:
• Bond Yield: Bond yield represents the interest or coupon payments received from a bond relative to its current market price. It is expressed as a percentage and can be further classified as current yield, yield to maturity, or yield to call, depending on the specific characteristics of the bond.
• Dividend Yield: Dividend yield measures the annual dividend income generated by a stock relative to its market price. It is calculated by dividing the annual dividend per share by the stock’s current market price.
• Rental Yield: Rental yield applies to real estate investments, particularly rental properties. It measures the annual rental income generated by the property relative to its market value or purchase price.