understanding financial jargon
In order to understand the expected return on any investment the investor needs to know what the income will be, and what the capital return is going to be. For a bond you can calculate two yields. The flat yield is the annual coupon (or interest) payment as a percentage of the bonds current price. So if a bond pays a nominal coupon of 7p per year and the current bond price is 95p then the flat yield is 7/95 or 7.37%.
However if the bond has a face value of £1.00 and the bond is held to maturity, the bond holder will also receive 5p capital gain, so both bond yields have to be taken into consideration. The Gross Redemption Yield (GRY) calculates the capital gain as an annual percentage over the period to redemption and adding this to the flat yield.
See Gross Redemption Yield (GRY) for further details.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
We hope you found this information useful.
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