GILTS

System

Hey guys/gals

Could anyone explain to me the difference between the flat yield and redemption yield.

My understanding is that the flat yield is the percentage of interest gained on your initial investment. I'm not sure how the redemption yield fits in here....help much appreciated! :roll:

System

Re:GILTS

Hi

I didnt know myself but as im studying this stuff myself I thought I would look it up.

Here goes the textbook definition:

YIELD: The income from a security as a proportion of its market price. The flat yield (interest yield, running yield and income yield) on a fixed interest security is the gross interest amount divided by the current market price, expressed as a percentage. The redemption yield or yield to maturity of a bond is the dicount rate such that the present value of all cash inflows from the bond (interest plus principal) is equal to the bonds market price.
<back to the planet Earth>

So in other words we have the bog standard yield (fair enough) and the redemption yield which is equivalent to an internal rate of return type calculation. I was thinking about showing a calculation but its late and that would be a tough one at the best of times!