BEY / EAY / APR / YTM - Please help. Very Confused!!!
Hi, everyone! I am really confused about yields. Could not found appropriate answer.
1) Taking into consideration that BEY = 2* Semiannual effective yield, why then BEY DOES NOT EQUAL to 4 * quarterly effective yield?
2) Is YTM our “stated rate”? So to compute Effective annual return (EAR) we use this YTM.
EAR = [ (1 + stated annual yield / m)m ] - 1 where m - number of compounding periods THEN we can compute
Effective rate for period = [ (1 + EAR)1/m ] - 1 where m number of compounding periods. So using this formula we can obtain semiannual effective / quarterly effective yield etc Is this is other way to compute effective rate fo period without computing effective annual yield before?
3) We convert what yield (effective or stated annual (YTM)) using this formula?:
(1 + APR/m)m = (1+ APR / n)n
4) Why we need to use BEY rather than EAR (makes more sense for me)
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