Definition of Coupon equivalent yield

Coupon equivalent yield

True interest cost expressed on the basis of a 365-day year.

Annual percentage yield (APY)

The effective, or true, annual rate of return. The APY is the rate actually
earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking
one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate
has an APY of 12.68% (1.01^12).

Bond equivalent yield

Bond yield calculated on an annual percentage rate method. Differs from annual
effective yield.

Bond-equivalent basis

The method used for computing the bond-equivalent yield.

Bond-equivalent yield

The annualized yield to maturity computed by doubling the semiannual yield.

Capital gains yield

The price change portion of a stock's return.

Cash and equivalents

The value of assets that can be converted into cash immediately, as reported by a
company. Usually includes bank accounts and marketable securities, such as government bonds and Banker's
Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Cash equivalent

A short-term security that is sufficiently liquid that it may be considered the financial
equivalent of cash.

Cash-equivalent items

Temporary investments of currently excess cash in short-term, high-quality
investment media such as treasury bills and Banker's Acceptances.

Certainty equivalent

An amount that would be accepted in lieu of a chance at a possible higher, but
uncertain, amount.

Common stock equivalent

A convertible security that is traded like an equity issue because the optioned
common stock is trading high.

Convenience yield

The extra advantage that firms derive from holding the commodity rather than the future.

Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.

Coupon

The periodic interest payment made to the bondholders during the life of the bond.

Coupon payments

A bond's interest payments.

Coupon rate

In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually
paid twice a year.

Current coupon

A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
offered on new bonds of a similar maturity and credit risk.

Current yield

For bonds or notes, the coupon rate divided by the market price of the bond.

Current-coupon issues

Related: Benchmark issues

Dividend yield (Funds)

Indicated yield represents return on a share of a mutual fund held over the past 12
months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not
redemption charges.

Dividend yield (Stocks)

Indicated yield represents annual dividends divided by current stock price.

Earnings yield

The ratio of earnings per share after allowing for tax and interest payments on fixed interest
debt, to the current share price. The inverse of the price/earnings ratio. It's the Total Twelve Months earnings
divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is
shown in percentage.

Effective annual yield

Annualized interest rate on a security computed using compound interest techniques.

Equivalent annual annuity

The equivalent amount per year for some number of years that has a present
value equal to a given amount.

Equivalent annual benefit

The equivalent annual annuity for the net present value of an investment project.

Equivalent annual cash flow

Annuity with the same net present value as the company's proposed investment.

Equivalent annual cost

The equivalent cost per year of owning an asset over its entire life.

Equivalent bond yield

Annual yield on a short-term, non-interest bearing security calculated so as to be
comparable to yields quoted on coupon securities.

Equivalent loan

Given the after-tax stream associated with a lease, the maximum amount of conventional
debt that the same period-by-period after-tax debt service stream is capable of supporting.

Equivalent taxable yield

The yield that must be offered on a taxable bond issue to give the same after-tax
yield as a tax-exempt issue.

Fixed-income equivalent

Also called a busted convertible, a convertible security that is trading like a straight
security because the optioned common stock is trading low.

Flattening of the yield curve

A change in the yield curve where the spread between the yield on a long-term
and short-term Treasury has decreased. Compare steepening of the yield curve and butterfly shift.

Full coupon bond

A bond with a coupon equal to the going market rate, thereby, the bond is selling at par.

High-coupon bond refunding

Refunding of a high-coupon bond with a new, lower coupon bond.

High-yield bond

See:junk bond.

Indicated yield

The yield, based on the most recent quarterly rate times four. To determine the yield, divide
the annual dividend by the price of the stock. The resulting number is represented as a percentage. See:
dividend yield.

Level-coupon bond

Bond with a stream of coupon payments that are the same throughout the life of the bond.

Liquid yield option note (LYON)

Zero-coupon, callable, putable, convertible bond invented by Merrill

Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon periods, usually the first, is longer than the other periods or the standard period.

Low-coupon bond refunding

Refunding of a low coupon bond with a new, higher coupon bond.

Liquid yield option note (LYON)

Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co.

Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon
periods, usually the first, is longer than the other periods or the standard period.

Non-parallel shift in the yield curve

A shift in the yield curve in which yields do not change by the same
number of basis points for every maturity. Related: Parallel shift in the yield curve.

Parallel shift in the yield curve

A shift in the yield curve in which the change in the yield on all maturities is
the same number of basis points. In other words, if the 3 month T-bill increases 100 basis points (one
percent), then the 6 month, 1 year, 5 year, 10 year, 20 year, and 30 year rates increase by 100 basis points as
well.
Related: Non-parallel shift in the yield curve.

Pass-through coupon rate

The interest rate paid on a securitized pool of assets, which is less than the rate
paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.

Pure yield pickup swap

Moving to higher yield bonds.

Realized compound yield

yield assuming that coupon payments are invested at the going market interest
rate at the time of their receipt and rolled over until the bond matures.

Relative yield spread

The ratio of the yield spread to the yield level.

Reoffering yield

In a purchase and sale, the yield to maturity at which the underwriter offers to sell the bonds
to investors.

Required yield

Generally referring to bonds, the yield required by the marketplace to match available returns
for financial instruments with comparable risk.

Riding the yield curve

Buying long-term bonds in anticipation of capital gains as yields fall with the
declining maturity of the bonds.

Steepening of the yield curve

A change in the yield curve where the spread between the yield on a long-term
and short-term Treasury has increased. Compare flattening of the yield curve and butterfly shift.

Weighted average coupon

The weighted average of the gross interest rate of the mortgages underlying the
pool as of the pool issue date, with the balance of each mortgage used as the weighting factor.

Weighted average portfolio yield

The weighted average of the yield of all the bonds in a portfolio.

Yield

The percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest
paid on a bond or note.

Yield curve

The graphical depiction of the relationship between the yield on bonds of the same credit quality
but different maturities. Related: Term structure of interest rates. Harvey (1991) finds that the inversions of
the yield curve (short-term rates greater than long term rates) have preceded the last five U.S. recessions. The
yield curve can accurately forecast the turning points of the business cycle.

Yield curve option-pricing models

Models that can incorporate different volatility assumptions along the
yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.

Yield curve strategies

Positioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve.

Yield ratio

The quotient of two bond yields.

Yield spread strategies

Strategies that involve positioning a portfolio to capitalize on expected changes in
yield spreads between sectors of the bond market.

Yield to call

The percentage rate of a bond or note, if you were to buy and hold the security until the call date.
This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several
years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate,
length of time to the call and the market price.

Yield to maturity

The percentage rate of return paid on a bond, note or other fixed income security if you
buy and hold it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to
maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at
the same rate.

Yield to worst

The bond yield computed by using the lower of either the yield to maturity or the yield to call
on every possible call date.

Zero coupon bond

Such a debt security pays an investor no interest. It is sold at a discount to its face price
and matures in one year or longer.

Zero-coupon bond

A bond in which no periodic coupon is paid over the life of the contract. Instead, both the
principal and the interest are paid at the maturity date.

CASH AND CASH EQUIVALENTS

The balance in a company’s checking account(s) plus short-term or temporary investments (sometimes called “marketable securities”), which are highly liquid.

dividend yield ratio

Cash dividends paid by a business over the most
recent 12 months (called the trailing 12 months) divided by the current
market price per share of the stock. This ratio is reported in the daily
stock trading tables in the Wall Street Journal and other major newspapers.

Bond Equivalent Yield

Bond yield calculated on an annual percentage rate method

Coupon / Coupons

The periodic interest payment(s) made by the issuer of a bond
(debt security). Calculated by multiplying the face value of the
security by the coupon rate.

Coupon Rate

The rate of interest paid on a debt security. Generally stated on an
annual basis, even if the payments are made at some other
interval.

Effective Annual Yield

Annualized rate of return on a security computed using compound
interest techniques

Yield Curve

A graphical representation of the level of interest rates for
securities of differing maturities at a specific point of time

Yield to Maturity

The measure of the average rate of return that will be earned on a
debt security held until it matures

Zero-coupon Bond

A security that makes no interest payments; it is sold at a discount
at issue and then repaid at face value at maturity

equivalent units of production (EUP)

an approximation of the number of whole units of output that could have been
produced during a period from the actual effort expended
during that period; used in process costing systems to assign
costs to production

labor yield variance

(standard mix X actual hours X standard rate) - (standard mix X standard hours X standard rate);
it shows the monetary impact of using more or fewer total hours than the standard allowed

material yield variance

(standard mix X actual quantity X standard price) - (standard mix X standard quantity X standard price);
it computes the difference between the
actual total quantity of input and the standard total quantity
allowed based on output and uses standard mix and
standard prices to determine variance

process quality yield

the proportion of good units that resulted from the activities expended

yield

the quantity of output that results from a specified input

yield ratio

the expected or actual relationship between input and output

Coupon

Detachable certificate attached to a bond that shows the amount of
interest payable at regular intervals, usually semi-annually.Originally
coupons were actually attached to the bonds and had to be cut off or “clipped”
to redeem them and receive the interest payment.

Coupon dates

The dates when the coupons are paid. Typically a bond pays
coupons annually or semi-annually.

Coupon rate

The nominal interest rate that the issuer promises to pay the
buyer of a bond.

Par yield curve

The yield curve of bonds selling at par, or face, value.

Spot curve, spot yield curve

See Zero curve.

Yield

a. Measure of return on an investment, stated as a percentage of price.
yield can be computed by dividing return by purchase price, current market
value, or other measure of value.
b. Income from a bond expressed as an
annualized percentage rate.
c. The nominal annual interest rate that gives a
future value of the purchase price equal to the redemption value of the security.
Any coupon payments determine part of that yield.

Yield curve

Graph of yields (vertical axis) of a particular type of security
versus the time to maturity (horizontal axis). This curve usually slopes
upward, indicating that investors usually expect to receive a premium for
securities that have a longer time to maturity. The benchmark yield curve is
for U.S. Treasury securities with maturities ranging from three months to 30
years. See Term structure.

Yield to maturity

A measure of the average rate of return that will be earned
on a bond if held to maturity.

Zero curve, zero-coupon yield curve

A yield curve for zero-coupon bonds;
zero rates versus maturity dates. Since the maturity and duration (Macaulay
duration) are identical for zeros, the zero curve is a pure depiction of supply/
demand conditions for loanable funds across a continuum of durations and
maturities. Also known as spot curve or spot yield curve.

Zero-coupon bond, or Zero

A bond that, instead of carrying a coupon, is sold
at a discount from its face value, pays no interest during its life, and pays the
principal only at maturity.

Production yield variance

The difference between the actual and budgeted proportions
of product resulting from a production process, multiplied by the standard unit cost.

coupon

The interest payments paid to the bondholder.

coupon rate

Annual interest payment as a percentage of face value.

current yield

Annual coupon payments divided by bond price.

equivalent annual cost

The cost per period with the same present value as the cost of buying and operating a machine.

yield curve

Graph of the relationship between time to maturity and yield to maturity.

yield to maturity

Interest rate for which the present value of the bond’s payments equals the price.

Coupon

The annual interest payment associated with a bond.

Coupon Bond

Any bond with a coupon. Contrast with discount bond.

Current Yield

The percentage return on a financial asset based on the current price of the asset, without reference to any expected change in the price of the asset. This contrasts with yield-to-maturity, for which the calculation includes expected price changes. See also yield.

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