Investments · Module 1 of 5
What a return is made of
The three ways an investment can pay you back, and what it costs to turn it back into cash.
Key terms in What a return is made of
- Yield
Yield is a general term for the return earned on the money put into a bond, usually expressed as a yearly percentage. Price and yield move in opposite directions, so a bond that rises in price offers a lower yield to a new buyer. Several versions exist, including current yield and yield to maturity.
- Coupon rate
A coupon rate is the annual interest rate stated on a bond when it is issued, and it stays the same for the bond's life. It sets the fixed payments the issuer has promised to make to the holder. Because the market price of the bond can change, the coupon rate often differs from the yield a later buyer actually receives.
- Capital appreciation
Capital appreciation is the increase in the market price of an asset above what was paid for it. It is one component of an investment's overall performance, alongside income such as dividends or interest. It is realized only if the asset is sold, and it can be negative when prices fall.
Every term on Lever is in the money glossary.
About this module
What a return is made of is part of Investments, one of 15 subjects in Lever. It’s a short run of 5 lessons, about 13 minutes in all, so you can finish it in one sitting.
Every lesson takes one idea at a time. You read it with the math worked out step by step, answer a question that puts it to use, then see why the right answer is right and why the others aren’t.
It’s for anyone who was never taught this, and you don’t need to know anything first. Every lesson is free. Lever works out what you already know, so you can start here or let your path bring you to it.
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Try this module
It’s part of Investments. Lever will bring it to you when you’re ready, or you can go straight there.