What is a custody yield?
bond yield is essentially the amount or percentage of the income that the investor can predict to receive from the problem of bonds in the specified period of time. It is important to note that the calculation of bond yield includes the use of current data on the current price of the bond rather than the price at the time of purchase. Determination of the current state of bond yield also requires an understanding of the current annual coupon associated with binding. The calculation of bond yields also usually assumes that the buyer will hold the bond for at least one year.
A simple formula for calculating the bond yield includes the annual coupon division by the bond price. As an example, if the bond was awarded $ 100.00 in USD (USD) with an annual coupon of $ 6.00, the bond yield would be screened to six percent. However, this yield assumes that the price will not change and that the buyer will hold at least a bond one year.
ifThere will be a change in interest rates that lead to the shift of the current bond price, bond yield may indicate the loss of capital. Using the same example, if the price of the bond dropped to $ 90.00, this would result in a loss of $ 10.00, which is partially compensated by a coupon of $ 6.00. However, the loss of capital $ 4.00 per season remains. For the same reason, the shift of the ascending price of the bond would increase capital profits made from the investment.
Understanding how important bond yields are for investors. Investors can determine whether it is in their best interest to buy a bond and hold it for at least one year. If the projections indicate that the binding is very likely to bring a decent profit for one or two YES, the investor can decide to buy a problem. However, if there are indications that a bond in the first year is dropping value, it means an investor would probablyHe was unable to sell a bond for breaking enough, much less to make a profit from the investment. In this situation, the investor would be well advised to explore other bonds or go with completely different investment opportunities.