Warning
Info
Warning
Info
Simple English definitions for legal terms
coupon yield
Read a random definition: Residuary Estate
A quick definition of coupon yield:
Coupon yield is the amount of money you get every year from a bond or other investment, compared to how much you paid for it. For example, if you paid $100 for a bond and it pays you $5 every year, the coupon yield is 5%. This helps you figure out how much money you can make from your investment.
A more thorough explanation:
Coupon yield refers to the annual interest paid on a security, such as a bond, divided by the security's par value. It is also known as nominal yield.
- Current yield: The annual interest paid on a security divided by the security's current market price.
- Discount yield: The yield on a security sold at a discount.
- Earnings yield: The earnings per share of a security divided by its market price.
- Net yield: The profit or loss on an investment after deducting all appropriate costs and loss reserves.
If a bond has a par value of $1,000 and pays an annual interest of $50, then the coupon yield is 5% ($50/$1,000).
For a bond that is currently trading at $900 and pays an annual interest of $50, the current yield is 5.56% ($50/$900).
If a bond is sold at a discount for $950 and pays an annual interest of $50, the discount yield is 5.26% ($50/$950).
If a stock has earnings per share of $5 and is trading at $100, the earnings yield is 5% ($5/$100).
If an investment generates a profit of $1,000 after deducting all costs and loss reserves, and the initial investment was $10,000, then the net yield is 10% ($1,000/$10,000).
These examples illustrate how coupon yield is calculated and how it differs from other types of yield.