Yield

Yield is the rate of return on an investment expressed as a percent.

Yield is usually calculated by dividing the amount you receive annually in dividends or interest by the amount you spent to buy the investment.

In the case of stocks, yield is the dividend you receive per share divided by the stock's price per share. With bonds, it is the interest divided by the price you paid. Current yield, in contrast, is the interest or dividends divided by the current market price.

In the case of bonds, the yield on your investment and the interest rate your investment pays are sometimes, but by no means always, the same. If the price you pay for a bond is higher or lower than par, the yield will be different from the interest rate.

For example, if you pay $950 for a bond with a par value of $1,000 that pays 6% interest, or $60 a year, your yield is 6.3% ($60 ÷ $950 = 0.0631). But if you paid $1,100 for the same bond, your yield would be only 5.5% ($60 ÷ $1,100 = 0.0545).