Yields on firm’s short-term securities for comparison purposes are best stated as: HPY (365/days to maturity) The material says that it should be stated as bond equivlaent yields (BEYs). This allows fixed-income securities whose payments are not annual to be compared with securities with annual yields… Can someone explain this?
Most bonds are stated with semi annual compounding… You need to covert to BEY so you can compare the bonds based on semi annual compounding. It also works with EAY which will convert to Annual compounding.