Yield is how much money one earns on an investment. It has many different flavors of meaning, so please keep reading.
At its simplest, yield is how much money an investment earns. "I invested $1,000 and earned $500." (So the total value of that investment would be $1,500.) However, it's usually expressed as a percentage: "I earned 50%!"
More often, it is talked about per period of time, such as a year. If that 500 bucks had been earned over three years, then you could say "I earned 14.5% per year!" ($1,000 x 1.145 x 1.145 x 1.145 = $1,501) (To determine how to figure out what that annual yield is, see compounded annual return.)
The yield or "rate of return" can refer to several things. Among these are:
- Annual percentage yield, such as on a certificate of deposit (CD) or savings account
- Dividend yield, based on the dividend rate paid out at the time a stock is purchased
- Bond yield, which is the interest rate a bond pays out.
The word can be used in many other contexts, such as "expected yield," "high yield," and "minimum yield."
It comes from one meaning of yield -- to give up. Not as "to quit," but to to give or to put forth, as in "He planted trees which yielded fruit."
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