RUNNING YIELD Meaning and
Definition
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Running yield refers to the percentage return generated by an investment, typically a bond or fixed-income security, based on its annual interest payments relative to its current market price. It is commonly known as the annual income that an investor receives from an investment, expressed as a percentage of the initial amount invested.
To calculate the running yield, the annual interest payment is divided by the current market price and multiplied by 100 to obtain a percentage. For example, if a bond pays an annual interest of $50 and its market price is $1000, the running yield would be 5% ($50/$1000 x 100).
Running yield provides investors with an indication of the income generated by a fixed-income security in relation to its market value, which can be useful in assessing the attractiveness of an investment. However, it does not take into account potential capital gains or losses if the market value of the security changes. Therefore, it may not reflect the total return on the investment over time.
While running yield is predominantly used for fixed-income securities, it can also be applied to dividend-paying stocks or other investments that generate regular income. It serves as a measure of the income stream relative to the investment amount, providing investors with valuable information for evaluating potential returns and comparing different investment opportunities.
Common Misspellings for RUNNING YIELD
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Etymology of RUNNING YIELD
The term "running yield" is a financial term used to describe the annual income generated by an investment as a percentage of its current market price.
The word "yield" originated from the Old English word "gieldan" meaning "to pay, give, or render". It was later derived from the Middle English word "yelden" which also meant "to pay or yield".
The word "running" in this context comes from the concept of something being ongoing or continuous. It signifies that the yield is calculated based on the investment's current market price and is not a fixed or one-time payment.
Therefore, the etymology of the term "running yield" combines the historical meanings of "yield" as payment or return and "running" as continuous or ongoing.
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