Hi! Can anyone help me understanding the following? I’m struggling this:
A semi annual paying bond with a 8% YTM has an effective annual rate of 8.16% (= 1 + .08/2)2 - 1. And a BEY of 7.84%. How should I interpret these yields.
MANY thanks in advance!!
This makes no sense. If the EAY is 8.16% then the BEY is 8%, not 7.84%.
Where did you read this?
If EAR= 8%, then BEY=7.84%; separately, if YTM=BEY=8%, then EAR=8.16%. Sounds like 2 separate situations are being mixed together.
Many thanks! I forgot to specify these were 2 different questions.