What constitutes yield income in finance?

Yield income in finance primarily refers to the income generated from an investment in the form of regular cash flows. This typically includes the money received from coupon payments on fixed-income securities, as well as any earnings generated from reinvested income.

The reasoning behind this is that yield income focuses on the cash flows that investors receive during their investment period. In the case of fixed-income investments like bonds, the coupon payments represent the interest income received. Reinvestment income refers to the additional returns that come from reinvesting those coupon payments, which can yield additional income over time.

Considering other options, while coupon payments and capital gains can indeed form part of an overall investment return, they do not represent yield income in the strictest sense, as capital gains are associated with the increase in the investment's value rather than direct cash flows. Similarly, the combination of interest payments and dividends does not capture the reinvestment component that is crucial for yield income, because dividends do not come from fixed-income securities and are more related to equity investments. Finally, dividends plus equity appreciation emphasizes capital gains derived from increasing stock prices, which is not aligned with the typical definition of yield income, as it focuses on cash flow rather than appreciation.