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Equivalent bond yield

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Definition of Equivalent bond yield

Equivalent Bond Yield Image 1

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.



Related Terms:

Bond equivalent yield

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


Bond-equivalent yield

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


Bond Equivalent Yield

bond yield calculated on an annual percentage rate method


Accrual bond

A bond on which interest accrues, but is not paid to the investor during the time of accrual.
The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity.


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).



Bearer bond

bonds that are not registered on the books of the issuer. Such bonds are held in physical form by
the owner, who receives interest payments by physically detaching coupons from the bond certificate and
delivering them to the paying agent.


Bond

bonds are debt and are issued for a period of more than one year. The U.S. government, local
governments, water districts, companies and many other types of institutions sell bonds. When an investor
buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the
loan at a specified time. Interest-bearing bonds pay interest periodically.


Equivalent Bond Yield Image 2

BOND

A long-term, interest-bearing promissory note that companies may use to borrow money for periods of time such as five, ten, or twenty years.


Bond

A long-term debt instrument in which the issuer (borrower) is
obligated to pay the investor (lender) a specified amount of
money, usually at specific intervals, and to repay the principal
amount of the loan at maturity. The periodic payments are based
on the rate of interest agreed upon at the time the instrument is
sold.


bond

Security that obligates the issuer to make specified payments
to the bondholder.


Bond

A financial asset taking the form of a promise by a borrower to repay a specified amount (the bond's face value) on a maturity date and to make fixed periodic interest payments.


Bond

Usually a fixed interest security under which the issuer contracts to pay the lender a fixed principal amount at a stated date in the future, and a series of interest payments, either semi-annually or annually. Interest payments may vary through the life of bond.


bond

A debt security issued by a government or company. You receive regular interest payments at specified rates while you hold the bond and you receive the face value when it matures. Short-term bonds mature in less than five years; medium-term bonds mature in six to ten years; and long-term bonds mature in eleven years or greater.


Bond

Fixed interest security issued by a corporation or government, having a specific maturity date.


Bond agreement

A contract for privately placed debt.


Bond covenant

A contractual provision in a bond indenture. A positive covenant requires certain actions, and
a negative covenant limits certain actions.


Equivalent Bond Yield Image 3

Bond-equivalent basis

The method used for computing the bond-equivalent yield.


Bond indenture

The contract that sets forth the promises of a corporate bond issuer and the rights of
investors.



Bond indexing

Designing a portfolio so that its performance will match the performance of some bond index.


Bond points

A conventional unit of measure for bond prices set at $10 and equivalent to 1% of the $100 face
value of the bond. A price of 80 means that the bond is selling at 80% of its face, or par value.


Bond value

With respect to convertible bonds, the value the security would have if it were not convertible
apart from the conversion option.


BONDPAR

A system that monitors and evaluates the performance of a fixed-income portfolio , as well as the
individual securities held in the portfolio. bondPAR decomposes the return into those elements beyond the
manager's control--such as the interest rate environment and client-imposed duration policy constraints--and
those that the management process contributes to, such as interest rate management, sector/quality allocations,
and individual bond selection.


Bonds payable

Amounts owed by the company that have been formalized by a legal document called a bond.


Brady bonds

bonds issued by emerging countries under a debt reduction plan.


Bull-bear bond

bond whose principal repayment is linked to the price of another security. The bonds are
issued in two tranches: in the first tranche repayment increases with the price of the other security, and in the
second tranche repayment decreases with the price of the other security.


Bulldog bond

Foreign bond issue made in London.


Callable bond

A bond that allows the issuer to buy back the bond at a
predetermined price at specified future dates. The bond contains an embedded
call option; i.e., the holder has sold a call option to the issuer. See Puttable
bond.


callable bond

bond that may be repurchased by the issuer before maturity at specified call price.



Canada Savings Bonds

A bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value.


Capital gains yield

The price change portion of a stock's return.


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.


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.


Cash Equivalents

Highly liquid, fixed-income investments with original maturities of three months or less.


Cash Equivalents

Instruments or investments of such high liquidity and safety that they are virtually equal to cash.


Certainty equivalent

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


Collateral trust bonds

A bond in which the issuer (often a holding company) grants investors a lien on
stocks, notes, bonds, or other financial asset as security. Compare mortgage bond.


Common stock equivalent

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


Completion bonding

Insurance that a construction contract will be successfully completed.


Conflict between bondholders and stockholders

These two groups may have interests in a corporation that
conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective
covenants work to resolve these conflicts.


Convenience yield

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


convertible bond

bond that the holder may exchange for a specified number of shares.


Convertible bonds

bonds that can be converted into common stock at the option of the holder.


Convertible eurobond

A eurobond that can be converted into another asset, often through exercise of
attached warrants.


Corporate bonds

Debt obligations issued by corporations.


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 Bond

Any bond with a coupon. Contrast with discount bond.


Coupon equivalent yield

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


Current yield

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


current yield

Annual coupon payments divided by bond price.


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.


Cushion bonds

High-coupon bonds that sell at only at a moderate premium because they are callable at a
price below that at which a comparable non-callable bond would sell. Cushion bonds offer considerable
downside protection in a falling market.


Debenture bond

An unsecured bond whose holder has the claim of a general creditor on all assets of the
issuer not pledged specifically to secure other debt. Compare subordinated debenture bond, and collateral
trust bonds.


Deep-discount bond

A bond issued with a very low coupon or no coupon and selling at a price far below par
value. When the bond has no coupon, it's called a zero coupon bond.


Discount bond

Debt sold for less than its principal value. If a discount bond pays no interest, it is called a
zero coupon bond.


Discount Bond

A bond with no coupons, priced below its face value; the return on this bond comes from the difference between its face value and its current price.


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 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.


Dividend yield (Stocks)

Indicated yield represents annual dividends divided by current stock price.


Dollar bonds

Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with
"U.S. Dollar" bonds, a common term of reference in the Eurobond market.


Dollar price of a bond

Percentage of face value at which a bond is quoted.


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.


Effective Annual Yield

Annualized rate of return 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 annual cost

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


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.


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


Eurobond

A bond that is (1) underwritten by an international syndicate, (2) offered at issuance
simultaneously to investors in a number of countries, and (3) issued outside the jurisdiction of any single
country.


Eurobond

A debt security issued in a market other than the home market of
the company issuing the security


eurobond

bond that is marketed internationally.


Eurodollar bonds

Eurobonds denominated in U.S.dollars.


Euroyen bonds

Eurobonds denominated in Japanese yen.


Extendable bond

bond whose maturity can be extended at the option of the lender or issuer.


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.


Flower bond

Government bonds that are acceptable at par in payment of federal estate taxes when owned by
the decedent at the time of death.


Foreign bond

A bond issued on the domestic capital market of anther company.


Foreign bond market

That portion of the domestic bond market that represents issues floated by foreign
companies to governments.


Full coupon bond

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


General obligation bonds

Municipal securities secured by the issuer's pledge of its full faith, credit, and
taxing power.


Global bonds

bonds that are designed so as to qualify for immediate trading in any domestic capital market
and in the Euromarket.


Government bond

See: Government securities.


High-coupon bond refunding

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


High-yield bond

See:junk bond.


Income bond

A bond on which the payment of interest is contingent on sufficient earnings. These bonds are
commonly used during the reorganization of a failed or failing business.


Indexed bond

bond whose payments are linked to an index, e.g. the consumer price index.


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.


Industrial revenue bond (IRB)

bond issued by local government agencies on behalf of corporations.


Insured bond

A municipal bond backed both by the credit of the municipal issuer and by commercial
insurance policies.


International bonds

A collective term that refers to global bonds, Eurobonds, and foreign bonds.


Investment grade bonds

A bond that is assigned a rating in the top four categories by commercial credit
rating companies. For example, S&P classifies investment grade bonds as BBB or higher, and Moodys'
classifies investment grade bonds as Ba or higher. Related: High-yield bond.


Junk bond

A bond with a speculative credit rating of BB (S&P) or Ba (Moody's) or lower is a junk or high
yield bond. Such bonds offer investors higher yields than bonds of financially sound companies. Two
agencies, Standard & Poors and Moody's investor Services, provide the rating systems for companies' credit.


junk bond

bond with a rating below Baa or BBB.



 

 

 

 

 

 

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