In finance and investing, "yield" denotes the income produced by an investment over a specific timeframe. This is generally represented as a percentage of the investment's cost or its current market value. Essentially, it reflects the return on an investment, typically calculated on an annual basis.

There are different types of yields, depending on the investment type:

Bond Yield: In the realm of bonds, yield refers to the rate of return based on the bond's face value (or par value). The most commonly referenced yield for a bond is the annual interest payment divided by the current market price, known as the current yield. For instance, if you purchase a bond with a face value of $1,000 that pays an annual interest (or coupon) of $50, your current yield would be 5% ($50/$1,000*100). While this may not make you extremely wealthy, it can certainly help cover your Netflix subscription!

Dividend Yield: When it comes to stocks, think of dividend stocks as the generous uncle in your investment family. The dividend yield is calculated by dividing the annual dividend payment by the stock's market price. For example, if a company pays an annual dividend of $2 and the stock is priced at $40, your dividend yield would be 5% ($2/$40*100). It's like receiving a birthday gift every year, even when it’s not your birthday. Who wouldn’t want to have their cake and eat it too?

Yield to Maturity (YTM): Next is the yield to maturity (YTM), which represents the total yield you will earn by holding a bond until it matures. Think of it as committing to a fitness routine; it may be challenging, but the rewards are worthwhile. YTM considers both the annual interest payments and any capital gain or loss realized by holding the bond until maturity. For example, if you buy a bond for $900 that matures at $1,000 in 10 years and pays an annual coupon of $40, your YTM would exceed the current yield because you also gain a $100 profit when the bond matures. Quite a sweet deal, right?

Yield on Cost: Lastly, yield on cost compares the annual income from an investment to its original cost. This yield type is akin to keeping score; it indicates how well your investment has performed over time relative to your initial expenditure. If you purchased a stock for $10 per share and it pays a $1 annual dividend, your yield on cost would be 10%. However, if the stock price doubles to $20 while the dividend remains at $1, your dividend yield would drop to 5%, but your yield on cost would still proudly stand at 10%.