Yield, of a security, is the percentage relationship of its income to its current market price. Except by accident it is unlikely to be the same as the nominal ('coupon') rate of interest which (for fixed-interest securities) is the contractual income expressed in relation to the nominal value of the security. Thus a 3 per cent bond has a nominal yield of per cent of its £100 nominal value: if it can be bought for £50 the true yield is 6 per cent, that is (100/ 50) x 3 per cent. Similarly with securities yielding a variable income such as shares. The nominal yield of a share is the percentage dividend declared on the original issue price of the share, e.g. 20 per cent per 5s. share. If the price of the 5$. shares is 25$., the true yield is 4 per cent, that is five twenty-fifths of 20 per cent. Yield is therefore indicated by dividing the par or nominal value by the current price and multiplying by the rate of dividend or interest. Other things remaining the same, the higher the price of a security the lower its yield, and conversely.

This is the 'fiat yield'. With irredeemable securities flat yield indicates the rate of return on invested capital that a buyer will receive for all time as long as he holds it. This is not so with 'dated' securities, which bear a date (or range of dates) for the cash redemption of their nominal or face value. The true rate of return on dated securities differs from the flat yield because of the prospect of repayment of the full nominal value of the security. The 'yield to redemption' takes into account that if such a security is bought at a price below (or above) par value, the return will include capital appreciation (or depreciation) when it is redeemed. The yield to the redemption date is equal to the fiat yield plus a percentage given by the formula; annual sinking fund required to accumulate to the difference between the purchase price and the redemption value divided by the purchase price. Without allowance for compound interest, the yield to redemption can be illustrated as follows: if the current price of a 3 per cent fixed interest stock repayable at par in eight years is 92, the purchaser of 100 nominal value will obtain an income of £3 plus an average appreciation of Li per year on his investment as the stock rises from 92 to its maturity value of 100. If the capital value of the sum invested thus grows steadily over the whole eight years, the average sum invested will be 96 and the yield to redemption will be the percentage which the combined annual gain (L

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