Episode Summary "What's the yield?" is a deceptively simple question that often leads to a dangerous trap. At any given second, a single bond can have three different numbers correctly labeled as its "yield". This episode untangles these figures to explain why a high advertised yield is sometimes an illusion, how to avoid the "yield trap" in marketed income products, and why the most commonly quoted number is often the least useful to your actual portfolio.

Key Concepts

• Coupon Rate: The fixed interest rate printed on the contract. Because it is a percentage of par value rather than your purchase price, it only tells you the cash flow, not your actual investment return.
• Current Yield: The annual coupon divided by the current market price.  ...