# Bond Yield

## What is a 'Bond Yield'

A bond yield is the amount of return an investor will realize on a bond. Though several types of bond yields can be calculated, nominal yield is the most common. This is calculated by dividing amount of interest paid by the face value. Current yield is calculated by dividing the amount of interest it pays by current market price of the bond.

Next Up

## BREAKING DOWN 'Bond Yield'

The yield of a bond is inverse to its price: as bond prices increase, bond yields fall. For example, assume that an investor purchases a bond with a 10% annual coupon and a par value of \$1,000. The yield on this bond would be its par value divided by the interest it pays. The interest would be \$100 (10% of \$1000), making its yield \$100/\$1000 = 10%. If the bond price were to fall to \$900, the yield would become \$100/\$900 = 11.1%. The investor will still receive the same amount of interest, since the interest is based on the bond’s par value, but would have a higher yield because the bond price fell.

Investors may see bond yields fall when economic conditions push markets toward “safer” investments. Economic conditions that might decrease bond yields include high rates of unemployment and slow economic growth (or recession).

RELATED TERMS
1. ### Dollar Price

The percentage of par, or face value, at which a bond is quoted. ...
2. ### Required Yield

The return a bond must offer in order to be a worthwhile investment. ...
3. ### Negative Bond Yield

A negative bond yield is an unusual situation in which issuers ...

5. ### Current Yield

Annual income (interest or dividends) divided by the current ...
6. ### Bond Equivalent Yield - BEY

A calculation for restating semi-annual, quarterly, or monthly ...
Related Articles
1. Markets

### Understanding the Different Types of Bond Yields

Any investor, private or institutional, should be aware of the diverse types and calculations of bond yields before an actual investment.
2. Managing Wealth

### How Bond Prices and Yields Work

Understanding bond prices and yields can help any investor in any market.
3. Markets

### Calculating Bond Equivalent Yield

The bond equivalent yield calculates the semi-annual, quarterly or monthly yield on a discount bond or note.
4. Markets

### Simple Math for Fixed-Coupon Corporate Bonds

A guide to help to understand the simple math behind fixed-coupon corporate bonds.
5. Markets

### Understanding Interest Rates, Inflation And Bonds

Get to know the relationships that determine a bond's price and its payout.
6. Managing Wealth

### How To Evaluate Bond Performance

Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk.
7. Markets

### Bond Yields: Current Yield And YTM

A bond's current yield, also called "bond yield," is the interest it pays annually divided by the bond's price. A stock's current yield, also called "dividend yield," is the sum of its annual ...
8. Managing Wealth

### Find The Right Bond At The Right Time

Find out which bonds you should be investing in and when you should be buying them.

### Finding The Best Yields

Using yields to supplement earnings can mean big bucks, with the right strategy.
10. Investing

### Explaining the Coupon Rate

Coupon rate is the stated interest rate on a fixed income security.
RELATED FAQS
1. ### Should investors focus more on the current yield or face value of a bond?

Find out when investors should focus on a bond's current yield versus its face value, including an example of how current ... Read Answer >>
2. ### What is the relationship between current yield and yield to maturity (YTM)?

Learn about the relationship between a bond's current yield and its yield to maturity, including how the market price of ... Read Answer >>
3. ### Can a bond have a negative yield?

The return a bond provides to an investor is measured by its yield, which is quoted as a percentage. Current yield is a commonly ... Read Answer >>
4. ### What is the difference between the yield of stock and the yield of a bond?

Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond ... Read Answer >>
5. ### What causes a bond's price to rise?

Learn about factors that influence the price of a bond, such as interest rate changes, credit rating, yield and overall market ... Read Answer >>
6. ### What is the relationship between the current yield and risk?

Discover the relationship between a bondâ€™s current yield and risk, and how investors can use it to benefit their overall ... Read Answer >>
Hot Definitions
1. ### Diversification

A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
2. ### European Union - EU

A group of European countries that participates in the world economy as one economic unit and operates under one official ...
3. ### Sell-Off

The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
4. ### Brazil, Russia, India And China - BRIC

An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
5. ### Brexit

The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
6. ### Underweight

1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...