Enter the face value of a bond, its current price, and the days to maturity into the calculator. The calculator will evaluate and display the bond equivalent yield.

Bond Equivalent Yield Formula

The following equation can be used to calculate the bond equivalent yield.

BEY = [(FV - P) / P]* (365/d)
  • Where BEY is the bond equivalent yield
  • FV is the face value
  • P is the current price
  • d is the days to maturity

Bond Equivalent Yield Definition

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.

Bond Equivalent Yield Example

How to calculate bond equivalent yield?

  1. First, determine the face value.

    Calculate the face value of the bond.

  2. Next, determine the current price.

    Calculate the current price of the bond.

  3. Next, determine the days to maturity.

    Calculate the number of days until the bond matures.

  4. Finally, calculate the BEY.

    Calculate the bond equivalent yield using the formula above.

FAQ

What is a bond equivalent yield?

A bond equivalent yield, or BEY for short, is the annual percentage that a bond yields on average.

FAQ

What factors influence the bond equivalent yield (BEY)?
The BEY is influenced by the bond’s face value, its current market price, and the days until maturity. Changes in the market interest rates and the credit rating of the issuer can also impact the BEY.

How does the BEY compare with other yield measures?
BEY allows for an annualized yield comparison, making it easier to compare bonds with different maturities and coupon frequencies. It differs from measures like the current yield, which does not annualize the yield, or the yield to maturity (YTM), which assumes reinvestment of coupon payments at the YTM rate.

Can BEY be used for bonds with any coupon frequency?
Yes, BEY can be calculated for bonds regardless of their coupon frequency. It standardizes the yield calculation, allowing investors to compare annual yields of bonds with semi-annual, quarterly, or monthly coupons on an equal basis.

Why is BEY important for investors?
BEY is a critical tool for investors as it provides a standardized way to evaluate the yield of different bonds on an annualized basis. This comparison is crucial for making informed investment decisions, especially when choosing between bonds with different maturities, coupon rates, and prices.

bond equivalent yield calculator
bond equivalent yield formula