Simple yield definition
/What is Simple Yield?
Simple yield is the amount of interest received from an investment, divided by the current market price or face value of the associated investment. This is a simplified calculation used to approximate the return on an investment, without accounting for the compounding effect of these returns over time. This measure also does not account for any realized or unrealized gains or losses on these investments.
How to Calculate Simple Yield for a Bond
To calculate the simple yield on a bond, divide the total amount of annual interest payments from the issuer by the current market price of the bond. The calculation is as follows:
Total of annual interest payments ÷ Current market price of bond = Simple yield
How to Calculate Simple Yield on an Equity Investment
To calculate the simple yield on an equity investment, divide the total amount of annual dividend payments by the current market price of the investment. The calculation is as follows:
Total of annual dividend payments ÷ Current market price of the investment = Simple yield