Debt yield calculation refers to the process of determining the rate of return on a debt investment. It is calculated by dividing the annual interest payment by the current market value of the debt instrument. For example, if a bond with a $1,000 face value is purchased for $900 and pays $50 in annual interest, the yield would be 5.56% ($50 $900 = 0.0556 or 5.56%).
Debt yield calculation is important because it allows investors to compare the returns of different debt investments and make informed decisions about where to allocate their money. It is also used by financial analysts to evaluate the creditworthiness of companies and governments.