Bond Equivalent Yield (BEY)
Computes the Bond Equivalent Yield (BEY) of a discount instrument, such as a treasury bill sold below face value. The formula annualizes the percentage gain on the price paid on a 365-day basis: BEY = ((F − P)/P)·(365/t). It lets you compare, on the same ruler, a discount instrument with a coupon-paying bond. Be careful not to confuse it with the bank discount yield, which divides by face value and uses 360 days. Enter the face value, the purchase price and the days to maturity.
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Bond Equivalent Yield (BEY)
Computes the Bond Equivalent Yield (BEY) of a discount instrument, such as a treasury bill sold below face value. The formula annualizes the percentage gain on the price paid on a 365-day basis: BEY = ((F − P)/P)·(365/t). It lets you compare, on the same ruler, a discount instrument with a coupon-paying bond. Be careful not to confuse it with the bank discount yield, which divides by face value and uses 360 days. Enter the face value, the purchase price and the days to maturity.
Comparing apples to oranges in the rates market
Treasury bills and short-term paper pay no coupon: you buy for less than face value and receive the face at maturity, pocketing the difference. The trouble is comparing that gain with a bond that pays interest the normal way. Bond Equivalent Yield solves it by putting the discount paper's return on the same annualized ruler as the rest.
The calculation is the percentage change on the price you actually paid, stretched out to a 365-day year: BEY = ((F − P)/P)·(365/t). The detail matters: you divide by the price paid, not by the face value. That's where the classic confusion with bank discount yield comes from, which uses face value in the denominator and a 360-day year, and so delivers a smaller number for the same paper.
Enter the face value, the purchase price and the days to maturity. The tool returns the BEY as a percent per year. For long maturities, beyond half a year, the official treasury formula applies a small extra adjustment; the version here is the standard market approximation, enough for most comparisons.
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The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.