Current yield

Okay kiddo, let’s talk about current yield. Imagine you have a magical piggy bank (we can call it your “money bank”). You put some money in it and it grows a little bit every year because you created a savings plan.

Now, let’s say you decide to loan some of your money to your friend for a year in exchange for them giving you some extra money back. This extra money is called the interest rate and it is a way for you to earn money on the money you loaned.

But, the interest rate doesn’t tell the whole story. You also need to think about something called the current yield.

Simply put, current yield is how much you will be getting back as a percentage of the total amount of money you loaned. It tells you how much money you will make each year based on how much money you gave away.

For example, if you loaned your friend $100 with an interest rate of 5%, your friend would give you $5 extra dollars back after a year. But if the current yield was 7%, you would actually be making $7 for every $100 you loaned.

So, when you’re thinking about whether or not to loan money to someone, you need to think about both the interest rate and the current yield. They both play important roles in helping you make the right decision.