Yield on Cost (YOC)

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Definition of 'Yield on Cost (YOC)'

The yield on cost (YOC) is a measure of the return on an investment, expressed as a percentage of the original cost of the investment. It is calculated by dividing the annual income from the investment by the initial cost of the investment.

The YOC is a useful tool for comparing different investments and for making investment decisions. It can be used to determine which investments are likely to provide the best return on investment.

The YOC is calculated using the following formula:

YOC = Annual Income / Initial Cost

Where:

* Annual Income is the amount of money earned from the investment each year.
* Initial Cost is the amount of money invested in the first place.

For example, if an investment earns $100 per year and the initial cost of the investment was $1,000, then the YOC is 10%.

The YOC can be used to compare different investments with different annual incomes and different initial costs. For example, if an investment earns $100 per year and the initial cost of the investment was $1,000, then the YOC is 10%. If another investment earns $200 per year and the initial cost of the investment was $2,000, then the YOC is 10%. In this case, the two investments have the same YOC, even though they have different annual incomes and different initial costs.

The YOC can also be used to compare investments with different maturities. For example, if an investment earns $100 per year and the initial cost of the investment was $1,000, and the investment matures in 10 years, then the YOC is 10%. If another investment earns $200 per year and the initial cost of the investment was $2,000, and the investment matures in 20 years, then the YOC is 10%. In this case, the two investments have the same YOC, even though they have different annual incomes, different initial costs, and different maturities.

The YOC is a useful tool for comparing different investments, but it is important to remember that it is only one factor to consider when making investment decisions. Other factors to consider include the risk of the investment, the liquidity of the investment, and the tax implications of the investment.

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