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Interest Vs Yield CheatSheet

Interest refers to a fixed percentage return on the principal amount, while yield represents the actual return based on the current market price of an investment. Yield can fluctuate with market changes, unlike interest, which is typically fixed. High yield investments offer higher returns but often come with increased risk, exemplified by high yield or junk bonds issued by lower-rated companies.

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5 views3 pages

Interest Vs Yield CheatSheet

Interest refers to a fixed percentage return on the principal amount, while yield represents the actual return based on the current market price of an investment. Yield can fluctuate with market changes, unlike interest, which is typically fixed. High yield investments offer higher returns but often come with increased risk, exemplified by high yield or junk bonds issued by lower-rated companies.

Uploaded by

Deepanshi Saxena
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Interest vs Yield in Financial Markets

Interest ( ?)

Interest means , fix percentage return , interest

Example:

If you deposit 1,00,000 in a bank at 6% interest, 6,000 6,000 interest income

It is usually calculated on the face value or principal amount, and doesn't depend on market price.

Yield (Yield ?)

Yield concept actual investment , bond , mutual fund , asset

Yield = (Annual Income / Current Market Price) × 100

Example:

Suppose bond 100 interest face value 1,000

- 1,000 Yield = 10%

- 900 Yield = (100/900) × 100 = 11.11%

Yield can change as per market price, interest fix

Quick Comparison Table:

Feature | Interest () | Yield ()


Interest vs Yield in Financial Markets

--------------------------|------------------------------------------|------------------------------------------

Basic Meaning | Fixed return on principal | Actual return on market price

Fixed or Variable | Usually fixed | Varies with bond price/market changes

Use Case | Loan, bank deposit, bond coupon | Evaluating total return on investment

Dependence | Face value | Market price

Market Fluctuation Impact| | , yield -

Final Line:

Interest is like a promised rent, but yield tells you how profitable your investment really is,

considering what you paid for it.

High Yield What does it mean?

High yield means an investment is giving a higher return (percentage) compared to others.

Example:

You invest 1,000 in two bonds:

- Bond A gives 50 yearly Yield = 5%

- Bond B gives 100 yearly Yield = 10% High-Yield Bond

But usually: High Yield = High Risk

High Yield Bonds are also called Junk Bonds because they are issued by companies with lower

credit ratings.

In Hindi:
Interest vs Yield in Financial Markets

High Yield " "

Risk

Summary:

High Yield = High Return

Often means Higher Risk

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