Page 100 - CFA - Day 1 & 2 Course Notes
P. 100
LOS 7.f: Convert among holding period
yields, money market yields, effective Session Unit 2: Discounted Cash Flow Applications
annual yields, and bond equivalent yields.
Bond Equivalent Yield
The bond-equivalent yield refers to 2 × the semi-annual discount rate. This convention stems
from the fact that yields on U.S. bonds are quoted as twice the semi-annual rate, because
the coupon interest is paid in two semi-annual payments.
Example: Bond-equivalent
yield calculation (1): A 3-month
loan has a holding period yield
of 2%. What is the yield on a
bond-equivalent basis?
Example: Bond-equivalent
yield calculation (2)
The effective annual yield
on an investment is 8%.
What is the yield on a bond-
equivalent basis?
Concept checkers, page 123/127
