If an instrument’s return is in the form of income, a rate of interest is paid on the proceeds (the money lent) for the term to maturity.

Interest bearing instruments are issued at their full face value. The purchaser’s return on the security - its yield - is a fixed percentage added on to the principal at maturity.

Our 90-day CD has a principal value of $100,000, and bears interest of 9%. How much interest would the purchaser receive at maturity?

The calculation is as follows:

90 / 360 x 0.09 x $100,000 = $2,250.00

The total sum repaid at maturity would include the principal, so the investor would receive $102,250.00.