effective annual yield

Definition

The yield after taking into account the consequences of compounding. It is computed as [1 + (stated interest/n)]n - 1; where n is the number of payments within the year. For instance, a bond's return is 5% and is to be paid semi-annually, thus, the effective annual yield is calculated as: [1 + (.05/2)2 - 1 = 5.062%.

Use this term in a sentence

You should try to make sure that you know what a good effective annual yield will be and strive to always reach it.

​ Was this Helpful? YES  NO 3 people found this helpful.

The effective annual yield was used to best take into consideration the time that would transpire from the beginning until the end of the project.

​ Was this Helpful? YES  NO 3 people found this helpful.

Some newer investors do not take the Effective Annual Yield into consideration. Some bonds pay monthly returns, which effectively lower the actual yield of the bond.

​ Was this Helpful? YES  NO 11 people found this helpful.

Show more usage examples...

Browse Definitions by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
effective annual interest rate effective call price