In economics, interest generally refers to the profits (interest, profit) earned on investment, business or interest earned from lending or saving at a bank.
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In different cases, the income has different names, in securities investment, the return can be called as dividends, in savings deposits, term deposits, it is called interest or interest, In other investment and business activities, the profit can be called profit, profit…
To better understand the types of income we must first understand what income is?
What is yield?Types of yield in the market today
What is profit?
Yield is a concept that can be viewed from two angles: the lender’s perspective and the borrower’s perspective.
Yield on bank discount basis
To calculate the yield, the difference must be converted to an annual percentage. In this case, the yield would be calculated using the simple formula of discount divided by face value, multiplied by 360 and then divided by the number of days remaining to maturity.
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Yield to hold
Yield to hold is a type of return that is calculated on the basis of the holding period. So there is no need to know the exact number of days like how the bank discount yield is calculated.
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Effective annual return
This is the type of yield that can provide a more accurate yield calculation, especially when there are alternative investment opportunities that use compounding. At this time, compound interest is the profit earned from interest.