bond equivalent yield and effective ?

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archived_user

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Am I seeing two formulas? The bond equivalent yield in corporate finance is stated as the HPY times (365\days)….should it not be to the power of (365/days to maturity)? Or is this an effective bond yield? Cfa1 pm mock q. 73
 
Yes, two identical names for 2 different yield measures:
BEY in Corporate Finance: MMY on a 365 year basis: HPY * 365/D (used to compare costs of short-term financing)
BEY in Quants: effective annual rate on a semiannual bond basis: ((1+EAY)^1/2 - 1) *2
Both measures are < EAY
Regards,
Oscar
 
thats oscar….appreciated…so for QM …we could find the holding period yield and put it to the power of (365/days)
IF however we are given the annualized rate of return….we need to convert same to a semi annual effective rate (by taking the annualized rate and putting it to the power of (1/2) and times by 2 as the bond is expressed as twice the semi annual effective yield?
 
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