- This topic has 8 replies, 4 voices, and was last updated Apr-175:48 am by
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Up0
I know the formula to calculate each from the other. But can someone explain to me or tell me how i can identify if the yield that is given in the questions is BEY or EAY? And under what conditions or situations (with simple examples preferably) are BEY to be converted to EAY and vice-versa?
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Up5
do you have an example of a question where you would be wondering this? easier to explain in context
@sidmenon
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Up5
Normally it’s quite straightforward, if they give you semi annual yield, they can ask for BEY or EAY. But any for other periodic yield, they will ask for EAY only.
BEY is a simple x2 of semi-annual yield, whilst EAY is a compounded annual rate for any periodic yield.
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Up4
The question i found is simple. No point posting it here. Man, now i can’t find questions for BEY and EAY! :/
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Up3
Questions like these make me nervous…
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Up3
Yup @sidmenon. It’s a popular question type, good that you spot it early and try to address it. Let us know when you come across another one then we can go through it together 🙂
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Up3
I think i found another one in my 2nd exam, i’ll put it up here on Monday.
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Up3
I have a feeling they would give you the BEY… (because for EAY they would somehow have to make it clear that its the effective one)
some simple clarification is here: http://finance.zacks.com/compute-bond-equivalent-yield-effective-annual-rate-6069.html
waiting to see the question!
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Up0
Well, i don’t have a specific question right now, but i can look it up from the practice paper i did. I was asking because i noticed that they do ask such questions sometime which requires conversion.
I’ll get back to you with an example question soon enough.
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