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Yield


Yield is the return associated with an investment. This is expressed as a percentage of the upfront cost. The yield is inclusive of all cash flows associated with an investment.

For example, a stock that costs $100 upfront and is worth $101 in the future would have a yield of 1%. Similarly, a stock that costs $100 upfront and is still worth $100 in the future, but paid a dividend of $1 would also have a yield of 1%.

Yield is commonly used to define the potential gains associated with a bond. The yield assumes an optimistic scenario in which the issuer makes all the payments on the bond. In reality, there is a risk that the issuer will default on the bond.