Meaning & use
redemption yield
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Meaning
nouncountablefinancebusiness
The total return an investor gets from a bond if it is held until it is repaid, including interest and any gain or loss.
Grammar: Countable: you can say 'a redemption yield of 5%' or 'redemption yields are falling'.
Patterns
- redemption yield of a bond
- a redemption yield of X percent
- calculate the redemption yield
The bond's redemption yield is 4.5% per year.
Investors compare the redemption yield of different government bonds.
If you hold the bond until maturity, the redemption yield includes any capital gain.
Word forms
| plural | redemption yields |
|---|
Common combinations
- gross redemption yield
- The gross redemption yield does not take taxes into account.
- net redemption yield
- After tax, the net redemption yield is lower.
- redemption yield to maturity
- The redemption yield to maturity is often just called the yield to maturity.
- calculate the redemption yield
- Analysts calculate the redemption yield to compare bonds.
Synonyms and how they differ
- yield to maturity
- This is the more common term in everyday finance; 'redemption yield' is often used in British English and in more formal contexts.
- gross redemption yield
- This is a specific type of redemption yield that does not subtract taxes or fees.
Word family
- redeem verb
- To repay a bond or to exchange something for money or goods.
- redemption noun
- The act of repaying a bond or loan, or the act of being saved from sin.
- yield noun
- The profit or return from an investment.
Commonly confused: redemption yield or current yield? redemption yield or dividend yield?
redemption yield vs current yield
'Current yield' only looks at the annual interest compared to the bond's current price. 'Redemption yield' also includes any gain or loss when the bond is repaid at maturity.
redemption yield vs dividend yield
'Dividend yield' is for stocks and shows how much a company pays in dividends relative to its share price. 'Redemption yield' is for bonds and other debt investments.
Practice
What does 'redemption yield' measure?
Choose one answer.
'Redemption yield' is the total return, including interest and any capital gain or loss, if the bond is held to maturity. Option A describes the coupon rate, not the yield. Option C is the price, not the yield. Option D is a fee, not a yield.
Make it your own
Write a sentence using “redemption yield”, then check it and compare it with the examples above.