Yield

Yield is the income return on an investment, expressed as an annual percentage of the asset's current price or original cost. For a bond, yield is the annual interest payment divided by the bond's price. For a stock, the dividend yield is the annual dividend per share divided by the current share price.

Yield and price move in opposite directions for bonds: if a bond's price falls, its yield rises, and vice versa. This inverse relationship is fundamental to understanding fixed-income markets. A rising interest rate environment generally pushes bond prices down and their yields up.

It is important to distinguish between nominal yield (the stated return) and real yield (the return after subtracting inflation). An investment yielding 4% when inflation is running at 5% is actually losing real purchasing power. Always consider yields in the context of inflation to understand the true return on your money.