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Economics: An A-Z Guide by Matthew Bishop

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Y

Yield

The annual income from a SECURITY, expressed as a percentage of the current market price of the security. The yield on a SHARE is its DIVIDEND divided by its PRICE. A BOND yield is also known as its INTEREST RATE: the annual coupon divided by the market price.

Yield curve

Shorthand for comparisons of the INTEREST RATE on GOVERNMENT BONDS of different maturity. If investors think it is riskier to buy a bond with 15 years until it matures than a bond with five years of life, they will demand a higher interest rate (YIELD) on the longer-dated bond. If so, the yield curve will slope upwards from left (the shorter maturities) to right. It is normal for the yield curve to be positive (upward sloping, left to right) simply because ...

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