Q: What is a True Yield?

True Yield is your effective Return on Investment (ROI). Using the illustration above, the initial yield for the N100,000 is 10.0%. However, because interest is paid upfront, your true yield is actually the N10,000 interest received divided by the N90,000 actually paid. That is N10,000/N90,000 translating to 11.11%. This is however higher than the 10.0% rate per annum. The True Yield is fully earned when you hold to maturity.