1. What is Capital Gains Yield?

Capital Gains Yield (CGY) measures the price appreciation return on a bond or investment, calculated as the percentage change in price from the beginning to the end of the holding period.

2. How Does the Calculator Work?

The calculator uses the Capital Gains Yield formula:

Where:

• \( CGY \) — Capital gains yield (decimal)
• \( P_{end} \) — Ending price (currency units)
• \( P_{begin} \) — Beginning price (currency units)

Explanation: The formula calculates the percentage return from price appreciation alone, excluding any income components like coupon payments.

3. Importance of CGY Calculation

Details: CGY is essential for bond investors to separate price appreciation returns from coupon income returns, helping in total return analysis and investment decision-making.

4. Using the Calculator

Tips: Enter both beginning and ending prices in the same currency units. Prices must be positive values greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between CGY and total return?
A: CGY only measures price appreciation, while total return includes both capital gains and income components like coupon payments.

Q2: Can CGY be negative?
A: Yes, if the ending price is lower than the beginning price, CGY will be negative, indicating a capital loss.

Q3: How is CGY used in bond analysis?
A: It helps investors understand how much of their return comes from price changes versus coupon income, especially important for bonds trading at premium or discount.

Q4: Does CGY consider the time period?
A: The basic CGY formula doesn't annualize returns. For comparison across different time periods, CGY should be annualized.

Q5: What are typical CGY ranges for bonds?
A: CGY varies widely based on interest rate changes, credit quality, and time to maturity. It can range from negative values to significant positive returns.