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What is Bond Yield and How to Calculate It

December 6, 2010

Bond yield is the interest rate on a bond, that the bond holder receives, after accounting for the price the bond holder had to pay to purchase it. The U.S. Federal Reserve is attempting to decrease bond yields using quantitative easing to decrease the supply of U.S. Treasury Bonds. With less supply the market price should increase if demand remains constant.

If you are wondering why bond yields decrease as the market price increases, here is the equation for bond yields:

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