What is a Bond Equivalent Yield?
The bond equivalent yield is essentially a restating of the yield on a debt instrument, taking into consideration several factors that are involved regarding the interest on the asset. Bond equivalent yields are produced as a means of creating a means of comparison to an interest bearing coupon security. The basic detail that is required to initiate the process of determining the bond equivalent yield is fairly straightforward. The purchase price per one thousand shares is divided into the purchase price. That figure is multiplied by a figure that represents the number of days until maturity divided by the number of days in the period under consideration. The time period can be monthly, quarterly, semi-annually, or annually. It is important to note that in order for the bond equivalent yield that is determined with this formula must be compared to a security that has the same time period as well. As an example, if the bond equivalent yield is calculated using a time period of one year,
