The Comprehensive Guide to

Passive Income Investing

Learn the secrets of how Paul Tracy generates over \$XXX,XXX per month in passive income!

How to Become Financially Independent Through Passive Income Investing

## What is Bond Equivalent Yield (BEY)?

The bond equivalent yield (BEY) is a formula that allows investors to calculate the annual yield from a bond being sold at a discount.

## How Does Bond Equivalent Yield (BEY) Work?

The bond equivalent yield enables investors to compare the yield of a short-term security purchased at a discount with that of a bond with an annual yield.

Calculated as: ((Par Value – Purchase Price) / Purchase Price) * (365 / Days to Maturity)

The BEY for a bond with 100 days to maturity, a par value of \$1000, and purchased at the discounted price of \$975 would be calculated as follows:

((\$1000 - \$975) / \$975) * (365 / 100) = 0.0935

The BEY would be 9.35%.

## Why Does Bond Equivalent Yield (BEY) Matter?

The BEY calculation serves as a useful tool for determining the annual yield of an investment that does not make annual payments. This analysis allows investors to compare fixed-income securities whose payments are not annual or are selling at a discount to be compared with securities with annual yields.

[Use our Yield to Call (YTC) Calculator to measure your annual return if you hold a particular bond until its first call date.]

[Use our Yield to Maturity (YTM) Calculator to measure your annual return if you plan to hold a particular bond until maturity.]