Horizon Yield

  1. One example in Kaplan book says that the credit spread starts out at 350 bps, but then declines to 250bps. The Treasury curve is also flat at 8%. The horizon yield used is the 8% + (350bps - 250bps) = 9%

So is the horizon yield always going to be the Treasury rate + credit spread?

  1. Why is the BEY = Horizon Yield *2? I think I am forgetting the basics on this.

Thank you!


there was another post by S2000 on BEY - BEY assumes semi-annual compounding…