What does YIELD in cfa context mean.... interest

ikoreaii

Is yield same as interest rate??

MonkeyBusiness

savage Wrote:
-------------------------------------------------------
> Why is it then that the Bond price falls when the
> yield increases.....it should be directly
> proportional and not inverse??

Have you finished reading fixed income?

Bonds and yields are INVERSELY correlated. You should think about yield in relation to the financial product you are looking at. It might mean different things to different people, but given a specific scenario and product, it means the same thing to everyone in finance and basically that is what you need to know too.

smartpants

Yield is not coupons!

marsilni

yield is the constant compound interest rate that discounts the cash flows of a security to its present value.

we use it to mean return because we are pricing an asset based on a "10%" yield or compound growth of cash flows each year.



Edited 1 time(s). Last edit at Sunday, October 31, 2010 at 11:17PM by BayStreet.

evolsteevol

Why is it then that the Bond price falls when the yield increases.....it should be directly proportional and not inverse??

JPSem

Generally, it's the rate of return required for any investment and it includes the risk premium. So for instance, if you are calculating the PV of bond payments, you would discount it at the "yield", which is sort of like an interest rate.

There might be other meanings depending on the context though.