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Difference between interest yield and redemption yield

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Difference between interest yield and redemption yield

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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    Posts
  • May 17, 2021 at 6:44 am #620787
    cadhakan
    • Topics: 71
    • Replies: 123
    • ☆☆

    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

    May 17, 2021 at 8:41 am #620800
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 50053
    • ☆☆☆☆☆

    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.

    May 17, 2021 at 12:37 pm #620826
    cadhakan
    • Topics: 71
    • Replies: 123
    • ☆☆

    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.

    May 17, 2021 at 2:39 pm #620842
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 50053
    • ☆☆☆☆☆

    There is nothing deeper that can be learned 🙂

    And thank you for your comments. 🙂

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