The formula to calculate the Bond Equivalent Yield (BEY) is:
\[ BEY = \left(\frac{FV - P}{P}\right) \times \left(\frac{365}{d}\right) \]
Where:
Let's say the face value (\( FV \)) is $1,000, the current price (\( P \)) is $950, and the days to maturity (\( d \)) is 180. Using the formula:
\[ BEY = \left(\frac{1000 - 950}{950}\right) \times \left(\frac{365}{180}\right) \]
We get:
\[ BEY ≈ 0.1053 \times 2.0278 ≈ 0.2135 \]
So, the Bond Equivalent Yield (\( BEY \)) is approximately 21.35%.
Bond Equivalent Yield (BEY) is a financial metric used to calculate the annualized yield of a bond. It is a useful tool for investors to compare the yields of different bonds with varying maturities and coupon rates on an equal basis. BEY is particularly significant because it enables investors to make informed decisions about potential investments.
Definition: This calculation helps determine the yield on a taxable bond that is equivalent to the yield on a tax-exempt bond.
Formula: \( \text{Taxable Equivalent Yield} = \frac{\text{Tax-Exempt Yield}}{1 - \text{Tax Rate}} \)
Example: \( \text{Taxable Equivalent Yield} = \frac{5\%}{1 - 0.25} \)
Definition: The bond equivalent yield (BEY) is a calculation that converts the yield of a bond with different payment frequencies to an annual yield.
Formula: \( \text{BEY} = \frac{\text{Face Value} - \text{Purchase Price}}{\text{Purchase Price}} \times \frac{365}{d} \)
Example: \( \text{BEY} = \frac{1000 - 950}{950} \times \frac{365}{180} \)
Definition: This calculator helps determine the yield of a bond based on its price and coupon payments.
Formula: \( \text{Yield} = \frac{\text{Coupon Payment}}{\text{Bond Price}} \)
Example: \( \text{Yield} = \frac{50}{950} \)
Definition: This calculator helps determine the yield of a bond based on its purchase price and coupon payments.
Formula: \( \text{Yield} = \frac{\text{Coupon Payment}}{\text{Purchase Price}} \)
Example: \( \text{Yield} = \frac{60}{1000} \)
Definition: This calculator helps determine the current yield of a bond based on its price and coupon payments.
Formula: \( \text{Current Yield} = \frac{\text{Annual Coupon Payment}}{\text{Current Market Price}} \)
Example: \( \text{Current Yield} = \frac{70}{1050} \)
