The return an investor receives from a bond is known as "Bond Yield". A bond yield is the percentage return on a bond investment. There are several methods to define the bond yield. The most straightforward definition is to set the bond yield at the bond's coupon rate. The bond's price and coupon, or interest payment, determine the current yield, which is more accurate than the coupon yield if the bond's price is not the same as its face value.It is calculated by dividing the bond's interest payment by the bond's purchase price. For example, if a bond has a $100 interest payment and a $1,000 purchase price, the bond's yield would be 10%.Bond yields are important for investors because they provide a way to compare the potential return of different investments. For example, if one bond has a yield of 5% and another has a yield of 10%, the latter is the more attractive investment.Bond yields can also be affected by changes in interest rates. When interest rates rise, bond prices fall, and vice versa. This occurs because investors can get a higher return on their investment by investing in a different security.Changes in the bond market can also affect bond yields. For example, if there is increased demand for bonds, prices will rise and yields will fall. The reverse is true if there is decreased demand for bonds.Generally, bonds with longer terms have higher yields than bonds with shorter terms. This is because investors are being compensated for the risk of investing in a bond that may not be repaid in full.Bond yields are an important tool for investors, and it's important to understand how they work before making any investment decisions.
