# What is Yield?

Yield is a measure of return on an investment that is usually expressed as a percentage of the original investment. For example, if you invest \$100 in a stock and it goes up by \$10, the yield on your investment is 10%.

## Yield as a Measure of Return

Yield is often used as a measure of return on an investment. For example, if you invest \$100 in a stock and it goes up by \$10, the yield on your investment is 10%.

## Yield and Interest Rates

While yield is used as a measure of return on an investment, interest is often used as a measure of fees charged.

## The Relationship Between Yield and Price

Yield and price are inversely related. That is, when one goes up, the other goes down. This relationship exists because when the price of a security goes up, the yield goes down, and vice versa. This is because the price of a security is the present value of all future cash flows from that security, and yield is the return on the investment. So when the price goes up, the present value of the future cash flows goes up, and the yield goes down. Similarly, when the price goes down, the present value of the future cash flows goes down, and the yield goes up.

## Yield and Risk

Yield and risk are also inversely related, meaning the higher the yield, the higher the risk. This relationship exists because the higher the yield, the higher the potential return on the investment, and the higher the risk. At the same time, the higher the yield, the higher the potential return on the investment, and the higher the potential risk. So, when one goes up, the other goes up.

## Yield and Dividends

Similarly to the previous comparisons, yield and dividends are inversely related, too. This means that when the dividend goes up, the yield goes down, and vice versa. The reason for this is that the dividend is a payment from the company to the shareholders, and the yield is the return on the investment. So when the dividend goes up, the return on the investment goes down, and vice versa.

## Yield and Bond Prices

Yield and bond prices are also — you guessed it — inversely related. In this relationship, it means that when the bond price goes up, the yield goes down, and vice versa. This is because the bond price is the present value of all future interest payments from the bond, and the yield is the return on the investment. So when the bond price goes up, the present value of the future interest payments goes up, and the yield goes down. Similarly, when the bond price goes down, the present value of the future interest payments goes down, and the yield goes up.

## Yield Curves

A yield curve is a graphical representation of the relationship between yield and maturity. The x-axis represents maturity, and the y-axis represents yield. The curve shows how the yield changes as maturity changes, and the shape of the curve can give clues about future interest rates. For example, a steep curve indicates that long-term rates are expected to rise, while a flat curve indicates that rates are expected to stay the same.

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