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Glossary

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Yates's Correction
When a small amount of data is available for testing, the chi-square formula is adjusted to account for the small sample base.

Yield
The rate of return on an investment, usually expressed as an annual percentage rate.

Yield Curve
A curve on a graph that plots the interest rate (yield) of a bond on the vertical axis and the length of time until maturity on the horizontal axis. Their relationship is frequently referred to as the yield curve. Three basic types of curves exist. A normal curve is when interest yields are higher for longer-term bonds and lower for shorter-term bonds. A flat curve is when yields are about the same for longer term and shorter-term bonds. Finally, an inverted curve is when the short-term yields are higher than the yields on longer-term bonds. A yield curve shows the yields of bonds of the same quality but with different maturities to illustrate the relationship between bond yields and maturity lengths.

Yield to Maturity (YTM)
The percentage rate of return paid on a bond, note or other fixed income security if you buy and hold it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate. The annual rate of return an investor receives assuming a bond is held to maturity, taking into account the purchase price, capital gain or loss, coupon rate, maturity and reinvestment rate.

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