What term is used to describe the return on investment from a bond?

The term that describes the return on investment from a bond is yield. Yield specifically refers to the income generated from an investment, particularly in the context of fixed-income securities like bonds. It is often expressed as an annual percentage based on the investment cost, current market value, or par value of the bond.

Yield encompasses various forms of bond earnings, including interest payments, which are typically made semiannually, and any capital gains realized if the bond is sold before maturity at a price higher than its purchase price. This makes yield a comprehensive measure of what investors earn from bonds.

In contrast, equity refers to ownership in a company, typically represented by stocks, which is not applicable to bonds, as they are debt instruments. Capital gain specifically pertains to the increase in value of an asset, which can apply to investments like stocks or real estate but does not fully capture the broader earnings from bonds. Dividends are payments made by corporations to shareholders from profits, which again relates to equity rather than fixed-income investments. This distinction is important for investors who are considering different types of investments and their potential returns.