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Hi sir,
I want to know difference between interest yield and redemption yield . Can you please explain me how we use in real life scenario..,
Thank you so much in advance
The interest yield is the annual interest as a % of the market value (ignoring the redemption).
The redemption yield is the overall return taking into account both the interest and the amount on redemption (the IRR).
Some investors (for example old people with little other income) will prefer high interest each year (so high interest yield) and are not so interested in capital growth. Other investors (maybe younger people with a salary) might be less interested in the amount of interest each year, and more interested in capital growth.
It is just as I explain in my lectures with regard to the dividend policy on shares.
Yes sir I understand your explanation. In exam this much information will ask or should I learn more deeply about this two??
Thank you so much for your time and efforts which your are giving to all students worldwide. Your lectures are amazing and helping me a lot. Hope to pass FM in June 2021.
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