What does 'yield' represent in finance?

What does 'yield' represent in finance?

• A. The total return on an asset
• B. The income generated from an investment
• C. The market price of stocks
• D. The amount of dividend paid to shareholders

Answer: (B)

In finance, 'yield' specifically refers to the income generated from an investment, typically expressed as a percentage of the investment’s cost or current market value. This income can come from various sources, including interest payments from bonds, rental income from real estate, or dividends from stocks, making it a crucial metric for investors seeking to assess the profitability of their holdings. When investors analyze yield, they often look at different types, such as dividend yield for stocks or current yield for bonds, to evaluate the potential income relative to the price they pay for the investment. Yield helps investors compare the effectiveness of different investment vehicles in generating income, and it can influence their investment decisions based on their financial goals and risk tolerance. Understanding yield is essential for making informed investment choices, as it gives a clearer indication of the cash flow one can expect from an investment compared to just looking at appreciation potential or market price fluctuations.

In finance, 'yield' specifically refers to the income generated from an investment, typically expressed as a percentage of the investment’s cost or current market value. This income can come from various sources, including interest payments from bonds, rental income from real estate, or dividends from stocks, making it a crucial metric for investors seeking to assess the profitability of their holdings.

When investors analyze yield, they often look at different types, such as dividend yield for stocks or current yield for bonds, to evaluate the potential income relative to the price they pay for the investment. Yield helps investors compare the effectiveness of different investment vehicles in generating income, and it can influence their investment decisions based on their financial goals and risk tolerance.

Understanding yield is essential for making informed investment choices, as it gives a clearer indication of the cash flow one can expect from an investment compared to just looking at appreciation potential or market price fluctuations.