Bond equivalent yield formula

Consequently the discount yield for this bond. Find the reciprocal of your tax rate 1.

Tax Equivalent Yield Formula Calculator Excel Template

The good news is that the calculation is not too hard.

. For example if you want to convert a bond-equivalent yield of 6 percent into a monthly-equivalent yield substitute 006 into the formula to get 12 x 1 0062 16 - 1. Using the BEY formula the BEY for Bond A is. The bond equivalent yield BEY allows fixed-income securities whose payments are not annual to be compared with securities with annual yields.

Enter the scientific value in exponent format for example if you have value as 00000012 you can enter this as 12e-6. Alternatively the semiannual YTM BEY can be converted to annual YTM EAY equivalent annual yield using the following formula. The tax-equivalent yield is the pretax yield that a taxable bond needs to possess for its yield to be equal to that of a tax-free municipal bond.

EAY 1 BEY 2. It is not the same as the metric known as the bond equivalent yield which is. You want to calculate the bond equivalent yield for a bond with a par value of 2000 that was purchased at a discount price of 1900 and has 100 days to maturity.

Bond equivalent yield 85 80 80 x 365 d. Calculating Tax Equivalent Yield. Calculate the bond equivalent yield BEY The last step is to calculate the BEY using the bond equivalent yield formula shown below.

It was issued on December 1 2019 and is to mature in 90 days. Bond Equivalent Yield - BEY. Several types of bond yields exist including nominal yield which is the interest paid divided by.

The bond equivalent yield can be easily converted to annual effective yield by multiplying it by the number of days in a year. Heres how you calculate the TEY in a few steps. BEY 1 EAY 12 1 x 2.

The bond equivalent yield formula is used to determine the annual yield on a discount or zero coupon bond. For example if the bond equivalent yield is 8. The yield hence earned from the.

When making investment decisions comparing the yield or returns on the. Please use the mathematical deterministic number in field to perform the. Plugging in the calculation formula you calculate the yield as follows.

A bond yield is the amount of return an investor realizes on a bond. 1 072 2 1 7123. Let us solve the example.

Bond equivalent yield face value price price x 365 d. It means the bond was purchased at a discount of 400.

Bond Equivalent Yield Formula Calculator Excel Template