In finance, a bid refers to the price or yield at which a buyer indicates they are willing to purchase a financial obligation. It can also signify an offer by one company to purchase the share capital of another.
Current yield is the annual interest on an investment divided by its market price, providing a snapshot of the bond’s rate of return relative to its current price rather than its face value or yield to maturity.
The effective interest rate is a key financial metric calculated from the purchase price of a debt instrument. It provides a more precise measure of the actual yield on a bond compared to the face interest rate or coupon rate.
A Face Interest Rate is the percentage interest rate specified on the bond or loan document. It differs from the Effective Rate, which is a more meaningful yield figure reflecting the actual cost of borrowing.
Fixed-interest securities provide defined interest payments and are considered lower-risk investments. Examples include gilt-edged securities, bonds, preference shares, and debentures.
Permanent Interest Bearing Shares (PIBS) are non-redeemable securities issued by building societies that offer a fixed interest rate, usually between 10% and 13.5%, providing high yields in perpetuity. However, they carry significant risks and have a limited second-hand market.
In finance, a point has different implications depending on whether it is used in relation to bonds, real estate, commercial lending, or stocks. Understanding these distinctions is crucial for comprehending various financial metrics and transactions.
Positive carry is a financial situation in which the cost of borrowing money to finance an investment is lower than the yield earned from that investment.
The pretax rate of return is the percentage yield or capital gain generated by a particular investment or security before considering the impact of taxes.
Running yield, often referred to simply as yield, is a financial metric used to measure the annual income generated by an investment relative to its current market price.
Yield is a measure of the income generated from an investment over a particular period, expressed as a percentage of the investment's cost or current market value. This concept applies variably to fixed-interest securities and equities.
