Definition of Yield

“The interest rate generated on an investment where the amount of interest is in accordance with the market or based on the prevailing market price of the investment.”

What is Yield?

Yield is the rate of return investment for an investor expressed as a percentage. Yield measures the rate of return on a financial instrument, for example, share or bond, which is based on dividends and the rate interest rate.

The amount of yield depends on the trading method and how the trader tries to cope with the market situation. Therefore it is advisable to always observe the market situation & any risks that may arise to minimize losses.

Yield Types

The following are the types of yields :

1. Annual percentage

2. Current yield ( current yield ). The current yield is the ratio between coupons flower with pricebondAt the moment. For example, a bond is purchased at a price of Rp. 10,000,000 with a tenor of 5 years, then this bond offers a coupon of 10% per year. The current bond price is Rupees 42,469.36, so the current yield can be calculated by:

Yield = Net Realized Return (÷) Principal Amount

3. Yield at maturity ( yield to maturity, for bonds). Yield at maturity is the rate of return investment investors get until the end of the bond tenor or when the initial investment value is fully returned to the investor. Yield at maturity is calculated by equating the current bond price with the entire future rate of return.

4. Dividends (for shares). It is calculated by dividing the dividend paid by the price share. For example, a stock costs Rp. 1000 with a dividend of Rp. 50 per share, then the dividend yield is 5%. Usually, a high dividend shows the potential for attractive passive income from shares owned by investors.

What does yield mean According To Marketplace APM 

Types of Yields

1. Yield on Stocks(YOS)

Formula: Cost Yield = (Price Increase + Dividends Paid) (÷) Purchase Price

2. Yield on Bonds(YOB)

Formula: Nominal Yield = (Annual Interest Earned (÷) Face Value of Bond)

3. Yield to Maturity(YTM)
4. Yield to Worst(YTW)
5. Yield to Call(YTC)