Learn what bond equivalent yield is and how it is calculated on our page. Understand why this financial measure is important in comparing fixed income investments and make informed investment decisions.
The bond equivalent yield, also known as BEY, is a financial metric used to calculate and compare the annualized yield on securities with different compounding frequencies. It allows investors to better understand and compare the returns on fixed-income securities.
The formula to calculate bond equivalent yield is as follows:
Bond Equivalent Yield (BEY) = (2 * Semi-annual Yield) * 100
Bond equivalent yield is typically used to convert the yields of Treasury bills, notes, and bonds from their stated interest rate with semi-annual compounding into an annual equivalent. This allows investors to easily compare the yields of fixed-income securities based on their annual rates.
By converting the semi-annual yield into an annual equivalent, bond equivalent yield allows for better comparison of fixed-income securities with different maturity dates or coupon rates. It makes it easier to analyze and evaluate different investment options.
Bond equivalent yield is an important metric for investors seeking to assess the potential returns on fixed-income investments. It provides a standardized way to compare yields, and allows investors to choose between investment opportunities based on their individual financial goals and risk appetite.
The bond equivalent yield is a useful tool for investors to evaluate returns on fixed-income securities. It simplifies the comparison of different investment options and makes it easier to make informed investment decisions.
Previous term: Bond Covenant
Next term: Corporate Bond Fund
Did you know you can earn $30 back on your first $30 of qualifying purchases with Rakuten?
Join now and start saving on every purchase from top retailers like Target, eBay, Zappos, Walmart, Kohl's & CVS. Whether you're shopping for fashion, electronics, home essentials, or health products, Rakuten makes it rewarding.
Sign up through this link and explore the endless possibilities to save and earn cash back!
Check out the Symbol Surfing blog to learn about investing.
