Page 42 - FINAL CFA SLIDES JUNE 2019 DAY 2
P. 42
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
Bond Equivalent Yield, p.119
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?
