The Gross Redemption Yield

We have seen the problems that occur with the flat yield and therefore there is no surprise that there is another measure that looks to overcome these problems.

In particular, this is the gross redemption yield, and there are two different approaches to this.

The simpler method is to recognise that the total return in a period of time is a combination of both the income and the capital, that is to say, it is the coupon received as well as any gain from the period and of course with any loss that there happens to be subtracted from that sum.

And so this is a simple measure of gross redemption yield.

However there are problems with it as it does not take account of the time value of money and so a really accurate calculation of this figure does definitely need to take this element into account.

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