What is Current Yield?
Current yield refers to the rate of return on an investment over a specific period, usually expressed as a percentage. It serves as an indicator of investment returns, reflecting the ratio of the income earned from the investment to the cost of the investment.
The current yield can be used to evaluate the profitability and risk of an investment. A positive current yield indicates a profit on the investment, while a negative current yield indicates a loss. The magnitude of the current yield can also be compared with other investments to assess relative performance.
Formula for Calculating Current Yield
The formula for calculating current yield is:
- (Current Total Asset Value - Initial Total Asset Value) / Initial Total Asset Value × 100%
Here, the current total asset value refers to the current investment value, and the initial total asset value refers to the original amount of the investment at the start.
For example, if someone purchased a stock for 1000 yuan on January 1, 2022, and its price was 2000 yuan on January 1, 2023, then their current yield would be (2000 - 1000) / 1000 × 100% = 100%. This means they achieved a 100% return on investment during this period.
What is the Difference Between Current Yield and Yield to Maturity?
Current yield refers to the rate of return on an investment over a specific period, usually expressed as a percentage. It serves as an indicator of investment returns, reflecting the ratio of the income earned from the investment to the cost of the investment.
Yield to maturity refers to the expected rate of return on an investment at the end of its term. It is typically expressed as an annual percentage and acts as an indicator of long-term investment returns.
For instance, if someone purchases a fixed deposit with a term of 5 years and an annual interest rate of 4%, then the yield to maturity would be 4% × (1 + 4%) ^ 5 = 6.76%. This means they can expect a 6.76% rate of return at the end of the term.
Therefore, the difference between current yield and yield to maturity lies in their calculation methods and application scenarios. The current yield is used to measure short-term investment returns, while yield to maturity measures long-term investment returns.
