Page 41 - FINAL CFA SLIDES JUNE 2019 DAY 2
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LOS 7.f: Convert among holding period yields, Session Unit 2: Discounted Cash Flow Applications
money market yields, effective annual yields,
and bond equivalent yields, p.119
Holding period yield to effective annual, p.119 yield—
the EAY is equal to the annualized HPY based on a 365-
day year. Now that we have computed the HPY, simply
annualize using a 365-day year to calculate the EAY as
follows:
Note that to convert the EAY back into the HPY, apply the reciprocal of the exponent to the EAY. This is the same as taking one
plus the EAY to the power (t/365). For example, we can convert the EAY we just calculated back to the HPY as follows:
