Listen to a Business English Dialogue About Indicated yield
Austin: Hi Sophia, do you know what “indicated yield” means in business and finance?
Sophia: Yes, I do. Indicated yield is the annual dividend or interest payment on a security expressed as a percentage of its current market price.
Austin: That’s right. It’s a measure of the income an investor can expect to receive from owning the security, taking into account its current price and income payments.
Sophia: How is indicated yield calculated?
Austin: Indicated yield is calculated by dividing the annual income payment by the current market price of the security and then expressing the result as a percentage.
Sophia: Can you give an example of indicated yield?
Austin: Sure, if a bond pays an annual interest of $50 and its current market price is $1,000, the indicated yield would be 5% ($50 divided by $1,000).
Sophia: What factors can affect the indicated yield of a security?
Austin: The indicated yield can be influenced by changes in the security’s price, changes in the amount of income payments, or changes in market interest rates.
Sophia: Is indicated yield the same as yield to maturity?
Austin: No, indicated yield and yield to maturity are different concepts. Indicated yield focuses on the current income payments relative to the security’s price, while yield to maturity considers the total return over the security’s entire holding period.
Sophia: How do investors use indicated yield in their investment decisions?
Austin: Investors may use indicated yield as a basis for comparing the income potential of different securities or as a gauge of the attractiveness of an investment relative to its price.
Sophia: Thanks for explaining, Austin. Indicated yield seems like an important metric for income-oriented investors.
Austin: You’re welcome, Sophia. It’s a useful tool for assessing the income-generating potential of various investment options.