The bond-equivalent yield (BEY) is a measure used to compare the annual yield between different debt instruments with different compounding periods. It is calculated as twice the semi-annual yield to maturity.

Given that the yield to maturity (YTM) on an annual-pay bond is 7.75%, we can calculate the bond-equivalent yield as follows:

1. First, we need to convert the annual yield to a semi-annual yield. This is done by dividing the annual yield by 2. So, 7.75% / 2 = 3.875%.

2. Next, we need to calculate the semi-annual yield to maturity. This is done by adding 1 to the semi-annual yield and then squaring the result. So, (1 + 3.875%)^2 = 1.0791015625.

3. Finally, we subtract 1 from the result and multiply by 100 to get the bond-equivalent yield as a percentage. So, (1.0791015625 - 1) * 100 = 7.91%.

Therefore, the bond-equivalent yield is closest to 7.90% (Option B).

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The bond-equivalent yield (BEY) is a measure used to compare the annual yield between different debt instruments with different compounding periods. It is calculated as twice the semi-annual yield to maturity.

Given that the yield to maturity (YTM) on an annual-pay bond is 7.75%, we can calculate the bond-equivalent yield as follows:

1. First, we need to convert the annual yield to a semi-annual yield. This is done by dividing the annual yield by 2. So, 7.75% / 2 = 3.875%.

2. Next, we need to calculate the semi-annual yield to maturity. This is done by adding 1 to the semi-annual yield and then squaring the result. So, (1 + 3.875%)^2 = 1.0791015625.

3. Finally, we subtract 1 from the result and multiply by 100 to get the bond-equivalent yield as a percentage. So, (1.0791015625 - 1) * 100 = 7.91%.

Therefore, the bond-equivalent yield is closest to 7.90% (Option B).

Knowee AI · Accepted Answer

The bond-equivalent yield (BEY) is a measure used to compare the annual yield between different debt instruments with different compounding periods. It is calculated as twice the semi-annual yield to maturity.

Given that the yield to maturity (YTM) on an annual-pay bond is 7.75%, we can calculate the bond-equivalent yield as follows:

1. First, we need to convert the annual yield to a semi-annual yield. This is done by dividing the annual yield by 2. So, 7.75% / 2 = 3.875%.

2. Next, we need to calculate the semi-annual yield to maturity. This is done by adding 1 to the semi-annual yield and then squaring the result. So, (1 + 3.875%)^2 = 1.0791015625.

3. Finally, we subtract 1 from the result and multiply by 100 to get the bond-equivalent yield as a percentage. So, (1.0791015625 - 1) * 100 = 7.91%.

Therefore, the bond-equivalent yield is closest to 7.90% (Option B).

f the yield to maturity on an annual-pay bond is 7.75%, the bond-equivalent yield is closest to:A.8.05%.B.7.90%.C.7.61%.

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