Yield Comparison Calculator

On 10,000 of principal, yields of 3%, 4.5% and 5.2% pay 300, 450 and 520 a year. The highest is 520, the gap to the next best is 70, and the spread between best and worst is 220. What those figures do not carry is why one yield is higher than another: term, credit quality, liquidity and lock-up all sit outside this calculation.

What the result means

The primary result is the highest of the three annual income figures. The secondary rows show each option's income, the gap between the best and the next best, and the spread between best and worst. The same percentage difference is a different cash amount at every principal: 2.2 points is 220 a year on 10,000 and 22 a year on 1,000, which is why the rows report money rather than points.

What this tool doesn't capture

Risk, liquidity, tax treatment and lock-up periods. A 5% yield with a five-year lock is not directly comparable to a 4% easy-access rate. The yield gap describes income only; the things that explain why one yield is higher sit outside the model.

A worked example

Take a principal of 10,000 with yields of 3%, 4.5% and 5.2%. The tool returns 520.00 as the highest annual income, 70.00 as the gap to the second-highest, and 220.00 as the spread between best and worst.

What moves the number most

The headline is the largest of the three incomes, so it responds in segments rather than smoothly: each yield's influence changes at the point where it overtakes another or is overtaken. Within a segment both levers are exact. Moving the principal by 1% changes the headline by 1%, without exception, since the principal cannot change which yield leads. Moving the leading yield up by 1 percentage point raises the income by 1% of the principal, and the ratio between the two levers is 100 divided by the leading yield: about 19 times at a 5.2% lead, 10 times at a 10% lead. Downward that identity holds only until the leading yield falls to the second-highest, which is 0.7 points of headroom at the worked example's figures. Past that the second option becomes the headline and the figure stops following the yield down, so a 1 point cut moves it by 70 rather than 100. The middle yield moves the gap row, the lowest moves the spread row, and either reaches the headline only by overtaking the leader.

The formula behind this

Annual income is the principal multiplied by the yield divided by 100, computed once for each of the three yields. The headline is the largest of those three, the spread is the largest minus the smallest, and the gap to second best is the largest minus the next largest. Compounding frequency is ignored, since quoted yields are treated as simple annual rates.

Where this fits in planning

This is a what-if tool rather than a forecast. It shows how the income ranking shifts when a yield comes in lower than quoted, or when a different option turns out to pay the most. The defaults are a starting set of figures rather than a suggested allocation.