The yield of national debt refers to the ratio of the income from investing in national debt to the total investment each year. The rate calculated by one year is the annual rate of return. The bond yield is usually expressed by the annual yield of "%".
Bond yield is the ratio between the total annual income generated by investing in bonds and the total investment principal. There are three main factors that determine the bond yield: interest rate, term and purchase price. The change between these three elements determines the level of bond yield. Generally speaking, bonds bring investors the following three kinds of income:
① Interest income calculated according to the established interest rate of bonds.
(2) The difference between the subscription price and the repayment price (par price).
(3) Reinvestment income such as interest, profit and loss. According to these three different returns, the rate of return can be divided into direct rate of return, final rate of return with simple interest and final rate of return with compound interest. Direct rate of return is the ratio of annual interest income to investment principal calculated according to the established interest rate.
Type:
There are three kinds of bond yields:
Current rate of return; Yield to maturity; Early redemption yield.
Current rate of return: the current rate of return, also known as direct rate of return, refers to the income generated by interest income, usually paid twice a year, accounting for most of the income generated by corporate bonds. The current rate of return is the rate of return calculated by dividing the annual interest rate of bonds by the current market price of bonds. It does not consider the capital gain or loss of bond investment, but only measures the ratio of cash gain to bond price in a certain period.
Yield to maturity: The so-called maturity income refers to the income obtained from holding bonds until the repayment period, including all interest due. Yield to maturity, also known as the final rate of return, is the internal rate of return on the investment in treasury bonds, that is, the present value of future cash flow obtained from the investment in treasury bonds can be equal to the discount rate of the current market price of bonds. It is equivalent to the average annual rate of return that investors can get by buying at the current market price and holding it until maturity.
Early redemption rate of return: the rate of return obtained by investors when bond issuers redeem bonds before the stipulated maturity date.