Your math is perfect ... but yield should really on be used to describe the INTEREST (for bonds or CD's) or dividend (for stocks) part of the return (not the growth of principal)
Investopedia puts it this way: The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value.
When we talk about a Stock that is selling at $10 per share, but that at the end of a year is selling at $12 per share that's not yield, that's 20% GROWTH of PRINCIPAL
Now if that same stock pays a 3% dividend then it's TOTAL return has been 23% - 20% growth plus the dividend (yield) of 3%
People DO use the word yield incorectly (from finance perspective) all the time ... the best way to think of yield is that it's INCOME , and even more ideally, it will be qualified in some way (interest yield, dividend yield)
TO take tat idea a LITTLE further, SOME people will say that a stock has two yields (most academics in finance will say NO only dividend is yield, growht in stock price is appreciation or growth) ... but to carry the idea a little bit firther ... that yield means nothing without a modifier...
Some will say there are two stock dividend yields. If you buy a stock for $30 (cost basis) and its current price and annual dividend is $33 and $1, respectively, the "cost yield" will be 3.3% ($1/$30) and the "current yield" will be 3% ($1/$33).
And on bonds there are really four types of yields (again, each needing to be qualified - have modifier)
(1) coupon yield (the bond interest rate fixed at issuance),(2) current yield (the bond interest rate as a percentage of the current price of the bond), and (3) yield to maturity (an estimate of what an investor will receive if the bond is held to its maturity date). And finally, non-taxable municipal bonds will have a tax-equivalent (TE) yield determined by the investor's tax bracket.
And just to be thorough, lets take mutual funds:
Mutual fund yields are an annual percentage measure of income (dividends and interest) earned by the fund's portfolio, net of the fund's expenses. In addition, the "SEC yield" is an indicator of the percentage yield on a fund based on a 30-day period.
Sorry for the data dump, but if you'll use this as a key, you cn always make those throwing the word around be specific enough for it to meant somethin .... The MOST important distinction? Yield means income.
Hope this helps
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it is confusing....for mutual funds, you mentioned interest and dividends...does the interest mean the growth part and the dividend the yield part?....also, when a yield is given in a mutual fund, is higher better? what is the best way to judge a good mutual fund? thank you