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Simple English definitions for legal terms
nominal yield
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A quick definition of nominal yield:
Nominal yield is a way to measure how much profit you make from an investment. It's usually used for bonds and is the annual interest paid on the bond divided by the bond's par value. It's also called coupon yield. There are other types of yields, like current yield and earnings yield, but they all measure how much money you make from an investment.
A more thorough explanation:
Definition: Nominal yield is the annual interest paid on a security, like a bond, divided by the security's par value. It is also known as coupon yield.
Example: If a bond has a par value of $1000 and pays an annual interest of $50, then the nominal yield or coupon yield is 5% ($50/$1000).
This means that if you invest $1000 in this bond, you will receive $50 every year as interest.
Nominal yield is important for investors to know because it helps them compare different bonds and make informed investment decisions.