Yield Interest Rate

Key Highlights

• Yield interest rate is a measure of return for an investment, typically expressed as a percentage.

• The yield is calculated by dividing the annual interest payment by the bond's face value.

What is Yield Interest Rate?

Yield interest rate is a measure of return for an investment, typically expressed as a percentage. It represents the amount of money you could expect to receive if you invest in a certain security or asset, such as a stock, bond, or mutual fund.

How is Yield Interest Rate Calculated?

The yield on a bond is the amount of interest that the bond pays expressed as a percentage of the bond's face value. The yield is calculated by dividing the annual interest payment by the bond's face value. For example, if a bond has a face value of INR 1,000 and it pays annual interest of INR 50, the yield on the bond would be 5%.

Advantages of Yield Interest Rate

1. Predictable Returns
2. Regular Income
3. Risk Diversification
4. Compounding Benefits
5. Helps in Assessing Investment Viability

Disadvantages of Yield Interest Rate

1. Interest Rate Risk
2. Credit and Default Risk
3. Liquidity Risk
4. Reinvestment Risk
5. Limited Growth Potential