effective yield


The total yield on a bond when interest payments are reinvested. The effective yield is always higher than the basic yield because interest from the investment is itself earning interest, an effect known as compounding.

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If you are going to want to figure out how a bond has been doing you should calculate the effective yield.

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The new effective yield was finally determined because the interest payments were reinvested and everything could be determined fine now.

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Tom saw that the effective yield on his bond was going to provide him with a very steady return in the long-term and that he must be patient with his investment.

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