Answer:
Yield refers to how much income an investment generates, separate from the principal. It's commonly used to refer to interest payments an investor receives on a bond or dividend payments on a stock.
Step-by-step explanation:
In finance, yield refers to the income generated by an investment over a specific period of time, usually expressed as a percentage. It represents the return on investment and can be calculated in different ways depending on the type of investment.
Here are a few common types of yield in finance:
- Yield to Maturity (YTM): It is the total return anticipated on a bond if it is held until its maturity date. YTM takes into account the bond's current market price, its face value, coupon payments, and the time remaining until maturity.
- Dividend Yield: It measures the dividend income generated by an investment in stocks. It is calculated by dividing the annual dividend per share by the stock's current market price.