How can I choose the best bond yield?
The bond yield is the amount of return on your investment or the amount of interest obtained from the bond in which you invest your money. High -yield bonds return a higher return on investment than those with lower interest rates or income. Part of the selection of the best bond yield includes a calculation of the bond yield that considers the price paid for the bond purchase, the nominal value of the bond and the interest payment of the bond.
You want to calculate the bond yield, earn a nominal value or coupon rate of the bond with a price you pay for buying a bond. For example, a bond issued at a nominal value of $ 1,000 in the US (USD), which has a 10% coupon rate, brings an interest of $ 100. When the same bond with a nominal value of $ 1,000 is sold with a discount rate of $ 800, then the bond yield will increase to 12.5%.
unfavorable, bond with a nominal value of $ 1,000, which is sold for premiums $ 1,200, will reduce the bond yield to 8.33%. The main part of the selection of the bestSo the bond yield is to judge whether you are paying the nominal value, discount or premium price for purchasing custody in the first place.
The second main calculation is the calculation of the proceeds to the maturity (YTM). Unfortunately, this calculation is not a simple equation. The calculation of this image requires you to use bond yields on the maturity calculator that you find online or use a financial calculator to enter numbers. However, the answer to this calculation will tell you how much money you get for your investment in a bond if you hold it until the maturity date on the bond.
In short, but if you understand how ties behave, you can choose the best bond yield. Basically, how bond prices are rising, bond yields are falling. When bond prices fall, bond yields are rising. This means that if you have the opportunity to buy a bond at a discount price, then you will have more long -term than you will pay bonusesi or nominal value.
6 If you buy a bond for a nominal value, then you fall right in the middle - you do not earn as much as if you were buying a bond at a discount, but earning more than buying a bond for a bonus.