Bond Equivalent Yield (BEY) Calculator

Understanding Bond Equivalent Yield (BEY)

The Bond Equivalent Yield (BEY) is a key financial metric used to compare the yield of short-term discount bonds (such as Treasury bills, commercial papers, or zero-coupon bonds) with the yield of annual coupon-bearing bonds. Because short-term securities are often quoted on a discount basis, the BEY formula adjusts these yields to an annualized format, allowing investors to make more accurate and fair comparisons between different types of bonds.

By expressing yields on a 365-day annualized basis, BEY helps investors understand the true return of discount securities when compared to standard coupon bonds. This makes BEY an essential tool for investors, portfolio managers, financial analysts, and students of finance.

Formula for Bond Equivalent Yield

The formula for BEY is:

Where:
Bond Price: The price at which the bond is purchased
Face Value: The maturity value (amount received at maturity)
Days to Maturity: Number of days left until the bond matures

This formula ensures yields from discount bonds are annualized, making them directly comparable with coupon bond yields.

Examples of Bond Equivalent Yield Calculations

Let’s look at some practical examples of how BEY is calculated:

Example 1

Bond Price: $950

Face Value: $1,000

Days to Maturity: 180

✅ Interpretation: The bond generates an annualized return of 10.67%, making it attractive compared to standard coupon-paying bonds.

Example 2

Bond Price: $980

Face Value: $1,200

Days to Maturity: 156

✅ Interpretation: The steep discount results in a much higher BEY, showing how discounted bonds can offer very strong returns when annualized.

Example 3

Bond Price: $9,700

Face Value: $10,000

Days to Maturity: 90

✅ Interpretation: This bond yields 12.54% annually, showing how even small discounts over shorter maturities can generate attractive returns.

These examples demonstrate how BEY helps normalize bond yields for accurate comparison, regardless of maturity length.

Features of Our Bond Equivalent Yield (BEY) Calculator

Who Should Use This Calculator?

Why Use an Online BEY Calculator?

Manual BEY calculations involve multiple steps and can be error-prone, especially when comparing multiple bonds across different maturities. Our Bond Equivalent Yield Calculator ensures:

Practical Applications of BEY