What is the difference between Yield and Interest Rate? - ProProfs Discuss

# What is the difference between Yield and Interest Rate?

Asked by E. Stanley, Last updated: May 27, 2022

#### Samantha Stewart

Love to do some charity work. Have a passion for writing and do it in my spare time

Samantha Stewart, Philanthropist, Post Graduate, Corpus Christi

Yield and interest rate are different financial instruments. Yield simply refers to dividends or interests that you receive from an investment such as bonds or stock over a period of time. It refers to how much a person gains from an investment.

The interest rate refers to the percentage that a lender charges for a loan. For instance, a lender can charge a 10% interest to borrow someone \$10,000 in one year. So the lender receives \$1,000 as the yield on that investment.

The interest rate is expressed as an annual percentage rate. In summary, the yield is how much you receive over an investment and interest rate is the percentage charged on loan over a period of time.

#### E. James

E. James

Yield is the monetary gain, and the interest rate is why you made the extra funds. The interest rate is indicated as a percentage. Whether you are paying or receiving dividends, the interest rate is the percentage of money above the initial amount.

The yield is how much money you gained from the initial investment. You can explain yield into terms of a percentage, and you can also do it easily in dollar amounts. With yields, you can compound an interest rate. On the other hand, with interest rates, you cannot compound the interest.

Yield is recognized through simple math. Take your original investment and divide it by the interest rate, which will give you your basic term yield. The interest rate is how many additional profits produced each term. The interest rate is bound in percentages.