Question

What does the word yield mean? Explain

Answer 1

Yield can be defined as an interest amount earned over a certain period of time on equity by the investor and company and it can be described as an important financial tool for making decisions on the amount of paying interest by the company. Yield also helps to identify the current value market value on a security.

Yield can be measured by the investor’s cash flow on the security of the money which they aim to provide the companies. Yield is associated with the term risk. The higher the risk factors mean the higher potential of the yield value. The term yield is not related with the return and there is a hairline difference between the return and the yield as return can be explained by the change of the dollars with the financial gain or loss over a time period. there are several types of yield is observed In the share market, for example, current yield, cost yield to secure the profits in the stock exchange.    

The formula for calculating the yield is:

Yield= (net realized amount/ principal amount)*100

For example if a man invest 100$ for a year in a reputed bank and after one year he get 10$ for the security deposit, then the yield is 10%.