If the yield to maturity on an annual-pay bond is 7.75%, the bond-equivalent yield is *closest* to:

- 8.05%.
- 7.90%.
- 7.61%.

what question is trying to convey? Help me with the language.

If the yield to maturity on an annual-pay bond is 7.75%, the bond-equivalent yield is *closest* to:

- 8.05%.
- 7.90%.
- 7.61%.

what question is trying to convey? Help me with the language.

Bond equivalent yield: nominal rate compounded semi-annually (2x per year).

It’s not a well written question.

When they say “the yield to maturity on an annual-pay bond”, what they mean is the *effective annual* yield to maturity. However, there’s no reason that you should understand that that’s what they mean.

In the real world, when the YTM is quoted on an annual-pay bond, it’s quoted as BEY, same as every other bond.