How it works (Example):
In general, yield is calculated as follows:
The term yield may refer to slightly different aspects of a return for variable types of investments. For example, a yield on bonds, such as the coupon yield is the annual interest paid on the principal amount of the bond. Current yield is the coupon yield on a bond at a specific point in the time before the bond maturity. A yield to maturity of a bond is the internal rate of return on a bond's cash flow, including the cost of the bonds, period payments from the bonds, if any, and the return of the principal at redemption.
[Use our to measure your annual return if you hold a particular bond until its first Calculatorcall date.]
In equities, yields on preferred shares are similar to bond yields. For example, the dividend yield is the total payments in a year from the preferred shares divided by the principal value of the preferred shares. The current yield refers to the annual payments divided by the current market price.