Glossary

Absolute return is a category of investment strategies that target an above-zero return (or, in some cases, a return that is above a certain positive hurdle rate). An absolute return fund is one that aims to achieve positive returns irrespective of market conditions and cycles.

Absolute return can also refer to the total return of a portfolio, as opposed to its relative return, which is the portfolio’s gain or loss compared against a benchmark.

An investment approach where the portfolio manager makes active trading decisions (such as active stock-picking decisions in an equity fund) to maximise returns, as opposed to passive management or passive investing, where the composition of the portfolio is tied to the make-up and weightings of a benchmark index.

An asset class is a group of investments or securities that broadly share similar financial characteristics and tend to behave in a similar fashion under different market conditions.

The three traditional asset classes are equity securities (stocks or shares), fixed income securities (bonds), and cash equivalents. Private equity, commodities, real estate and derivatives are typically considered alternative asset classes.

It is common for investors to diversify across different asset classes, depending on their financial situation, investment objectives and risk tolerance. A portfolio that consists predominantly of equities is usually thought to be high-risk, whereas a portfolio with a predominant allocation to bonds and cash is considered to be less risky (or a conservative allocation, as it is often called).

A benchmark in the context of fund management refers to a pre-defined index or portfolio against which the performance of a fund or strategy is measured. The benchmark used for an active strategy is typically a well-recognised market index with a similar investable universe and similar risk characteristics as the fund, but other standards may be also be used, such as the risk-free rate.

A measure of the per share value of a company based on shareholders’ equity, BVPS is calculated by dividing a company’s net book value or net asset value (i.e. total assets minus total liabilities and intangible assets) by the total number of ordinary shares outstanding.

A closed-ended fund or investment company is a pooled investment vehicle with a fixed amount of capital and whose shares or units trade on the secondary market. In Australia, listed investment companies (LICs) are a common type of closed-ended investment vehicle.

Closed-ended investment companies do not regularly issue new shares or cancel existing shares. As such, their cash flows (and hence investment decisions) are not impacted by daily capital inflows and outflows. By contrast, an open-ended investment vehicle is one that does not have a fixed amount of capital and where new units or shares are issued and existing ones are redeemed and cancelled according to investor demand and capital flows. The shares of a closed-ended LIC may, however, trade at a market price that is above (i.e. at a premium) or below (i.e. at a discount) the underlying net asset value of the LIC’s portfolio of investments.

Assets used as security against a loan and which therefore can be seized by the lender if the borrower defaults on repayments.

An economic indicator used to estimate inflation, the CPI is a measure of changes in the price level of a market basket of consumer goods and services purchased by households.

A credit default swap, also referred to as a credit derivative contract, is a type of derivative instrument that offers protection against the non-payment of unsecured government or corporate debt. In a typical credit default swap contract, the buyer of the swap makes periodic payments to the swap’s seller in exchange for the seller agreeing to provide compensation in the event of default by the debt issuer.

Also known as the net debt to book value ratio or the gearing ratio, the debt-to-equity ratio is calculated by dividing a company’s total liabilities by its shareholders’ equity. It is a measure of how much debt or leverage a company is using to increase returns and shows the relationship between funds provided by creditors and funds provided by shareholders. See also "leverage".

In economics, deflation refers to a sustained decrease in the general price level of goods and services. It is the antithesis of inflation. Technically, deflation is occurring when inflation is below 0%. Deflation increases the real value of money. However, many economists believe that deflation is problematic in a modern economy because it increases the real value of debt and may signal a self-perpetuating spiral of weakening demand and reduced economic activity.

When calculating the value of an option, the standard practice is to use Delta-adjusted valuation. “Delta” is a theoretical measure of the sensitivity of the option price to a change in the price of the underlying asset (usually expressed as a percentage).

Derivatives are financial instruments whose value is determined by or derived from the value of their underlying assets (such as stocks, bonds, indices, commodities, currency exchange rates and interest rates). Common types of derivatives include futures contracts, options, forward contracts and swaps.

Derivatives can either be traded on a securities exchange or over-the-counter (OTC). Exchange-traded derivatives are standardised while OTC derivatives are unregulated and are therefore seen as having greater counter-party risk.

Derivatives may be used for hedging or risk management purposes, but may also be used to speculate on the future direction of the value of the underlying assets. Derivatives may also enable a fund manager to gain exposure to certain markets or securities that are not directly available to the fund due to, for example, jurisdictional restrictions. Find out how derivatives may be used in Platinum’s investments here.

A ratio that indicates how much a company pays out to shareholders in dividends each year relative to its share price (adjusted for any share splits).

A measure of a company’s profitability, EBIT is all profits before deducting interest payments and income tax expenses. It is calculated as revenue minus cost of goods sold and operating expenses.

EBITA is a measure of a company’s operating profitability, i.e. the earnings it generates in the normal course of doing business, ignoring capital expenditures and financing costs. It is usually calculated by adding interest and amortisation expenses back to earnings before tax (EBT).

EBITDA is a measure of a company’s operating profitability, i.e. the earnings it generates in the normal course of doing business, ignoring capital expenditures and financing costs. It is usually calculated as revenue minus expenses (excluding tax, interest, depreciation and amortisation).

A measure of a company’s return on investment, the ratio is normalised for differences in capital structure, taxation and fixed asset accounting between companies.

An indicator of a company’s profitability, EPS equals to profit, net of tax and dividends to preferred shareholders, divided by the total number of ordinary shares outstanding.

A company's earnings per share over a 12 month period divided by its share price and expressed as a percentage, the earnings yield is the reciprocal of the price-to-earnings (P/E) ratio and is a measure of the rate of return on an equity investment.

A measure of a company’s total market value, EV equals to a company’s market capitalisation plus net debt, minority interest and preferred equity, minus cash and cash equivalents.

EV is a measure of a company’s total market value while “capital employed” represents the sum of shareholders’ equity and long-term debt liabilities. The EV/CE ratio represents the market’s assessment of the value of a company’s operating assets as a percentage of the book value of the capital invested in these assets.

EV/sales is a ratio that compares the enterprise value of the company to its sales. EV/sales is seen as more accurate than P/S, as P/S uses market capitalisation which does not take into account as well as EV does the amount of debt a company has.

An ETF is an index-tracking investment fund that is traded on an exchange. An ETF holds a portfolio of shares, bonds, commodities or other securities to replicate the performance of an underlying index, sector or asset class (e.g. US equities as represented by the S&P 500 Index). A physical ETF holds the same percentage of the underlying stocks as is represented by the weighting of those stocks in the index. A synthetic ETF uses derivatives to achieve the same returns as the index it tracks.

EFTs typically have lower fees than actively managed funds because ETFs do not employ research analysts or portfolio managers to try to pick winning stocks, rather they merely track the value of something else.

Excess return typically (and especially for absolute return strategies) refers to the investment returns of a fund or portfolio in excess of a pre-defined “risk-free” rate, such as the yield on US Treasury Bills or some other high quality government bonds.

The term “excess return” can also refer to the investment returns in excess of some other pre-defined benchmark of the fund, such as well-recognised market indices like the MSCI AC World Index or the S&P/ASX200 Index.

See "master-feeder fund".

Forward contracts are a type of financial derivative instruments under which parties agree to buy or sell currencies, commodities or other assets at a specified future data and for a pre-determined price. Forward contracts are similar to futures contracts, but are non-standardized and are not traded on regulated exchanges. They are over-the-counter (OTC) instruments that can be customised to any underlying asset, amount and delivery date, and can be settled on a cash or delivery basis.

Forward contracts are most prevalent in currency trades (forward foreign currency contracts) as a way to hedge against or speculate on future exchange rate movements.

Foreign exchange reserves are assets or savings that the central bank of a country holds in foreign currencies (most commonly the US dollar, but also the Japanese yen) for their stability and importance as a medium of exchange globally. Foreign exchange reserves enable governments to guarantee the debts on their own issued currency and to influence the value of their own currency (e.g. to prop up the value of their own currency by selling US dollars to buy their own currency).

Free cash flow is a measure of a company’s financial performance calculated as operating cash flow minus capital expenditures. Free cash flow represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base.

Futures contracts are a type of financial derivative instruments under which parties agree to buy or sell a stated amount of securities, commodities or currencies at a specified future data and for a pre-determined price. Futures contracts trade on regulated exchanges (futures exchanges) and use standardised terms to specify the quality and quantity of the underlying assets. Forward contracts are similar in concept, but are not traded on an exchange and are less standardised. Some futures contracts require the physical delivery of the underlying assets while others are settled in cash.

See "leverage".

Government bonds are debt securities issued to investors by a government to finance government spending (and to reduce or counter budget deficits). Government bonds of developed countries with a strong economy and high credit rating are considered risk-free because of their low likelihood of default. Government bonds such as the US Treasury bonds are therefore often used as a benchmark against which riskier securities such as corporate bonds and shares are compared.

Government bonds may also be used to control the money supply. A government (through its central bank) can increase the money supply of the nation and inject liquidity into the economy by repurchasing its own bonds, and conversely, it may reduce money supply by selling bonds and taking the cash out of the economic system.

Government bonds that are denominated in the local currency have a low default risk (because the government can always print more of its own currency), but the value of the currency may be a concern for investors, which is why the bonds issued by governments of emerging market countries are often denominated in US dollars instead of local currencies.

The GDP is the primary indicator used to gauge the health of a country’s economy.  It represents the total monetary value of all goods and services produced within a country over a specific time period (usually calculated on an annual basis, but also on a quarterly basis).

GDP includes all consumer spending, government spending, investments, and net exports. The three main methods to calculate GDP are the output (or production) approach, the expenditure approach, and the income approach, all of which should theoretically yield the same result.

Gross exposure equals the total value of long positions and short positions in a portfolio (long plus short). It is a measure of a portfolio’s overall exposure to financial market (i.e. the amount of money investors risk losing from market fluctuations). Gross exposure indicates the percentage of the portfolio’s capital that has been deployed as well as how much leverage is being used.

For example, a fund has $100 million of capital. It has deployed $80 million in long positions and $15 million in short positions. The fund has a gross exposure of $95 million or 95% of the fund’s net asset value. The fund’s net exposure, which is the difference between its long and short positions, is $65 million or 65% of the fund’s net asset value.

A hedge is an investment position that fully or partially offsets another investment position. Hedging is used to reduce the risk of adverse changes in the value of assets. It is akin to buying an insurance policy.

Derivatives (such as futures, forward contracts, swaps and options) are frequently used as hedges against their underlying assets, but a hedging strategy may also be achieved through, for example, diversification across sectors or markets with opposite risk characteristics.

“Indexing” or “index-tracking” is a passive form of fund management. An index fund is a fund that aims to replicate the performance of a market index, without making use of return forecasts, by holding the same portfolio of shares, bonds or other securities or assets that make up the underlying index (e.g. the S&P 500 Index) and in the same percentages as the index weightings. An exchange traded fund (or ETF) is a common type of index fund.

Indexing, or passive investing, is in contrast to active management which is an investment approach where the portfolio manager makes active trading decisions (such as active stock-picking decisions in an equity fund) to maximise returns.

Index funds typically have lower fees than actively managed funds because index funds do not employ research analysts or portfolio managers to try to pick winning stocks.

Inflation is the rate at which the general price level of goods and services increases. Inflation reduces the real value of money and diminishes purchasing power (unless matched by wage increases), leading to less consumer spending (hence less economic output), a decline in living standards and currency devaluation. Too much inflation therefore can be damaging, even catastrophic, for an economy. Economists generally believe an annual inflation of 2% to be a healthy level and central banks try to maintain a moderate level of inflation through monetary policy.

Leverage means borrowing. It measures how much a company relies on borrowed funds, rather than shareholder equity, to finance its operations. Leverage ratio (also known as gearing ratio and debt-to-equity ratio) refers to the amount of a company’s debt capital in proportion to the value of its equity capital (i.e. ordinary shares).

Leverage in the context of investing can also refer to the strategy of seeking to increase potential returns without increasing the initial capital outlay (for example, through the use of derivatives or margin trading).

LICs are pooled investment vehicles that are incorporated as companies and listed on a stock exchange (e.g. the ASX). Australian LICs are closed-ended entities with a fixed amount of capital, that is, they do not regularly issue new shares or cancel existing shares, and so their cash flows – and hence investment decisions – are not impacted by daily capital inflows and outflows (as is the case for managed funds). However, the share price of a LIC can – and often does – differ from the underlying net asset value of the LIC’s portfolio of investments.

A long-only strategy is an investment strategy that does not involve short-selling of securities or derivatives. This means that the strategy invests in securities (whether through physical holdings or derivative instruments) only with the expectation that their prices will rise.

Any investment strategy that takes both long and short positions in securities and/or derivatives, usually in an attempt to reduce overall market exposure while profiting from gains in its long positions and falls in its short positions. Long/short strategies are not necessarily managed to be market-neutral, and may have a directional bias (usually a long bias).

A managed fund is an open-ended unit trust investment vehicle in which investors’ monies are pooled together in exchange for units in the managed fund. A professional investment manager then invests the fund’s capital in shares or other assets on behalf of the unitholders. Each unit represents an equal portion of the fund’s assets and its value will rise or fall with the underlying value of the fund’s portfolio of investments. Investors may also receive distributions from a managed fund, based on the net income and realised capital gains the fund receives from its underlying investments.

In Australia, a managed fund is a type of “managed investment scheme”, regulated by the Australian Securities and Investments Commission (ASIC). In the US, this type of investment vehicle is more commonly known as “mutual funds”.

Managed funds allow individual investors to diversify across a broad range of investments – including foreign markets and asset classes that may not otherwise be accessible – with a relatively small amount of capital.

A master-feeder fund is a structure whereby investors place their money in one or more “feeder funds” or “feeders” which, in turn, invest their assets (“feed”) into one “master fund”. The master fund carries out all the investments and trading activities for the portfolio.

Master-feeder structures have traditionally been used to pool together assets from local and foreign investors who are subject to different tax treatments. They offer the advantage of achieving better economies of scale, lower costs, and, depending on tax structuring, greater tax efficiencies while allowing flexibility in setting fees, investment minimums, jurisdictional limitations and other operational characteristics.

An mFund product is an unlisted managed fund admitted for settlement under the Australian Securities Exchange (ASX) Operating Rules and available to investors through the ASX mFund Settlement Service. An mFund works in the same way as other unlisted managed funds, except that investors can buy and sell units in an mFund via the same broking services that they ordinarily use to trade shares in ASX-listed companies. This means less paperwork and a more streamlined transaction settlement process than the typical application process associated with investing in an unlisted managed fund.

The Platinum Global Fund  is an mFund product (mFund code: PLM01).

Further information about the ASX mFund Settlement Service is available on the ASX website.

Momentum investing refers to a category of investment strategies that aim to capitalise on the tendency for an asset’s price movements to continue over the short-term in the same direction as the existing trend.

Net asset value equals assets less liabilities. In the context of an investment vehicle such as a managed fund, the per-unit net asset value or (NAV per unit) is the net market value of the fund’s underlying portfolio of investments (usually calculated at the end of each business day based on the closing prices of the securities in the fund’s portfolio), less the value of any liabilities the fund may have, and divided by the total number of units on issue. This is usually the unit price at which investors can buy or sell their units in the fund (subject to any applicable buy/sell spread). Changes in a fund’s NAV may be caused by investment performance or capital flows.

Net exposure equals the difference between long and short positions in a portfolio (long minus short). It is a measure of a portfolio’s overall exposure to financial market (i.e. the amount of money investors risk losing from market fluctuations). Net exposure should be considered together with gross exposure, as a portfolio may have a high level of leverage (thus a high level of risk) while having a low net exposure.

For example, a fund with a net asset value of $100 million has an 80% long exposure and a 35% short exposure. It has a net exposure of 45%. Its long exposure, which is the total of its long and short positions, is 115%.

A measure of a company’s profitability, net margin (also called net profit margin) is the ratio of net profits to net sales. It is typically expressed as a percentage that shows how much of each dollar or revenue earned by the company is translated into profits.

Net tangible assets (NTA), also known as “book value” or "net asset value" (or “NAV”), is the value of a company’s total assets less the value of its intangible assets (such as goodwill and trademarks) and the value of its liabilities.

In the context of an ASX-listed investment company, “NTA backing per share” is defined in the ASX Listing Rules to mean:

• the company’s total assets, as calculated by the net market value of the company’s underlying portfolio of investments (that is, the amount which could be expected to be received from the disposal of those assets in an orderly market after deducting costs expected to be incurred in realising the proceeds of the disposal),
• less the company’s intangible assets and liabilities (including provisions for tax on realised income and gains, provisions for declared but unpaid dividends, provisions for unpaid management fees earned, and, where applicable, provisions for tax on estimated unreleased income and gains), and
• divided by the total number of ordinary shares the company has on issue.

An open-ended fund or investment company is a pooled investment vehicle that does not have a fixed amount of capital and which issues new units or shares and redeems existing ones according to investor demand and capital flows.

Most managed funds in Australia are open-ended. Unlike closed-ended investment vehicles such as listed investment companies (LICs), whose shares may trade at prices above or below the underlying net asset value of the LIC’s portfolio of investments, the units of an open-ended fund are priced at their net asset value and are not subject to fluctuations caused by supply and demand.

Given the obligation of an open-ended fund to meet redemptions, cash reserves and investment decisions may be impacted by capital inflows and outflows.

Options are a type of financial derivative instruments. An option is a contract that entitles the option-holder to buy or sell securities, indices, commodities, currencies or other underlying assets at a specified price (known as the exercise or strike price) either before or on a specified expiry date. The seller of the option (known as the option-writer) agrees to buy or sell the underlying asset in exchange for the price of the option (known as the option premium).

A “call option” is one that entitles the holder to buy the underlying asset while a “put option” is one that entitles the holder to sell the underlying asset. The value of an option is derived primarily from the value of its underlying asset, but is also influenced by other factors such as the length of time before the option reaches its expiry date.

Unlike a futures contract, an option represents a right to buy or sell an underlying asset, but does not impose an obligation to buy or sell on the option-holder.

A fund or portfolio is said to have outperformed the market when its returns exceeded the returns of the market index that it uses as a benchmark (e.g. the MSCI AC World Index). In this context, “outperformance” refers to the amount of the fund’s investment returns in excess of those of its benchmark.

A passive investment fund is also known as an index fund. It aims to replicate the performance of a market index, without making use of return forecasts, by holding the same portfolio of shares, bonds or other securities or assets that make up the underlying index (e.g. the S&P 500 Index) and in the same percentages as the index weightings. An exchange traded fund (or ETF) is a common type of passive investment fund.

Passive investing is in contrast to active management which is an investment approach where the portfolio manager makes active trading decisions (such as active stock-picking decisions in an equity fund) to maximise returns.

Passive funds typically have lower fees than actively managed funds because passive funds do not employ research analysts or portfolio managers to try to pick winning stocks.

P/B is the ratio of a company’s current share price to its book value (total assets minus intangible assets and liabilities). It is an indicator of the value of a company by comparing its share price to the amount of the company’s assets that each share is entitled to.

P/E is the ratio of a company’s current share price to its per-share earnings. It is an indicator of the value of a company by comparing its share price to the amount of per-share earnings the company generates.

A high P/E ratio suggests that the company’s share price is expensive relative to the company’s profits, which usually implies that investors are expecting the company’s future profits to grow quickly.

P/S is the ratio that compares a company’s current share price to its revenue. It is an indicator of the value placed on each dollar of a company’s sales and is typically calculated by dividing the company’s market capitalisation by its total sales over a 12 month period.

The PPI is a family of indices that measure the average change in selling prices received by domestic producers of goods and services over time. PPIs measure price change from the perspective of the seller or producer, and differ from the Consumer Price Index (CPI) which measures price change from the purchaser’s perspective. The PPI looks at three areas of production: industry-based, commodity-based, and commodity-based final demand-intermediate demand.

The PMI is an indicator of the economic health of the manufacturing sector. It is derived from monthly surveys of purchasing executives at private sector companies and is based on five major indicators: new orders, inventory levels, production, supplier deliveries and employment environment. A PMI reading of greater than 50 indicates an expansion of the manufacturing sector when compared to the previous month, while a reading of < 50 represents a contraction and a reading at 50 indicates no change.

QE is a monetary policy used by central banks to increase the supply of money by buying government bonds (and, to a lesser extent, other assets such as corporate bonds and shares) from the market. The intended outcome is to lower the yield on those assets, increase the total money supply in the financial system, and encourage more lending by banks and thus greater economic activity. Central banks use QE to stimulate the economy when interest rates are already at or close to zero.

A recession refers to a marked contraction in economic activity. The most commonly used technical indicator of a recession is two consecutive quarters of negative economic growth, as measured by a country’s GDP. A global recession is often thought to be occurring when global GDP growth falls below 2%.

RoCE is a measure of a company’s profitability and the efficiency with which its capital (which includes both equity and long-term debt) is employed. It is calculated as earnings before interest and tax (EBIT) divided by capital employed, where “capital employed” represents the sum of shareholders’ equity and the long-term liabilities. The higher a company’s RoCE ratio, the more efficient its use of capital.

RoE is a measure of a company’s profitability and the efficiency with which it generates earnings from every unit of the funds that shareholders have invested in it. It is calculated as profit (or net income after taxes) divided by shareholders’ equity. The higher a company’s RoE ratio, the more efficient its use of shareholders’ money.

SPS is a measure of a company’s productivity and represents how much revenue each share earned per year. It is calculated by dividing the total revenue earned in a financial year by the weighted average number of shares outstanding for that financial year.

Short-selling or “shorting” is a transaction aimed at generating a profit from a fall in the price of a particular security, index, commodity or other asset. To enter into a short sale, an investor sells securities that are borrowed from another. To close the position, the investor needs to buy back the same number of the same securities and returns them to the lender. If the price of the securities has fallen at the time of the repurchase, the investor has made a profit. Conversely, if the price of the securities has risen at the time of the repurchase, the investor has incurred a loss.

Where the fund policy or mandate permits, Platinum utilises short selling of stocks and/or indices for risk management (that is, to protect a portfolio from being either invested or uninvested in a particular security, sector or market) and to take opportunities to increase returns.

Swaps are a type of over-the-counter (OTC) derivative contract under which one party exchanges the payment stream from its financial instrument for the payment stream from another financial instrument held by the other party for an agreed period of time. One payment stream is usually fixed while the other is determined by reference to a variable, such as an interest rate (an interest rate swap), a currency exchange rate (a currency swap), the price of a company’s shares (an equity swap), or a commodity price (a commodity swap).

Swaps provide exposure to an underlying asset (e.g. an equity security or a currency) without physical ownership. They may be used for risk management (that is, to protect a portfolio from being either invested or uninvested in a particular security, sector or market) or to increase returns.

Total return refers to the overall return on an investment over a given period, including both income (e.g. from dividends and interest) and capital gains or losses (i.e. changes in the market value of the asset).

Total return can also refer to a category of investment strategies that seek to maximise the overall gains from both capital appreciation and income and that are generally flexible with regards to market exposure.

A fund or portfolio is said to have underperformed the market when its returns were lower than the returns of the market index that it uses as a benchmark (e.g. the MSCI AC World Index). In this context, “underperformance” refers to the amount by which the fund’s investment returns fell short of those of its benchmark.

UCITS stands for Undertakings for Collective Investment in Transferable Securities. UCITS is a regulatory framework established by the European Commission to create a harmonised regime throughout the European Union (EU) for the management and sale of investment fund products.

A UCITS fund is typically an open-ended pooled investment vehicle, akin to managed funds in Australia or mutual funds in the US. UCITS funds have become popular not only in EU member states, but also some Asian and Latin American countries, largely because of the regulatory standards and investor protection requirements entailed by the UCITS regime.

Platinum is the investment manager to Platinum World Portfolios PLC, an umbrella UCITS fund with three sub-funds.

Value investing traditionally refers to the investment style developed by Benjamin Graham in the 1930s which focused on identifying stocks that are trading at a discount to their intrinsic value. The term is now used to refer more broadly to various investment strategies that seek to take advantage of the tendency for relatively cheap assets to outperform relatively expensive ones.

Volatility is a statistical measure of the variation in returns for a given investment over a given time period. It is the same as standard deviation. High volatility implies bigger and more rapid swings in price or valuation over a relatively short period of time, while low volatility implies smaller and less frequent fluctuations.

Volatility is an indicator of the degree of uncertainty or risk involved in achieving a target return from an investment. The higher the volatility, the riskier the investment is generally considered to be.

The relative volatility of a particular security versus the market is known as “beta”. The beta coefficient of the relevant benchmark index is 1. A stock with a beta of greater than 1 is considered more volatile than the market while a lower than 1 beta indicates a lower volatility and risk than the market.

Yield refers to the income generated from an investment (such as the interest from cash deposits, the dividends from a shareholding, or the rent from a property investment), usually expressed as an annual percentage rate based on the cost of the investment (known as cost yield) or its market price (known as current yield).