📈 Bond Equivalent Yield Calculator
Calculate Bond Equivalent Yield (BEY) to compare discount instruments and bonds on an equivalent basis.
What is BEY?
BEY converts the yield on discount instruments (like T-bills) to an equivalent annual rate for comparison with coupon bonds. It uses a 365-day year (vs 360 for bank discount rate) and semi-annual compounding convention.
Why Bond Equivalent Yield Matters
Treasury bills and other discount securities are quoted on a bank discount basis, which understates the true return because it uses face value (not purchase price) as the denominator and assumes a 360-day year. BEY converts this to a 365-day, purchase-price-based yield so you can compare T-bill returns directly to coupon bonds, CDs, and other instruments that use 365-day conventions.
BEY vs Bank Discount Yield
Bank Discount Yield = (Face − Price) ÷ Face × 360/Days. Bond Equivalent Yield = (Face − Price) ÷ Price × 365/Days. The BEY is always higher than the discount yield because: (1) the denominator is the smaller purchase price rather than face value, and (2) it uses 365 days instead of 360. A 90-day T-bill with a 5% discount yield has a BEY of approximately 5.18%.
People Also Ask
BEY is a semi-annual yield annualized on a simple interest basis (no compounding). APY accounts for compounding. BEY is used for bonds with semi-annual coupon payments; APY is used for savings products. For 6-month or shorter instruments, BEY and APY are close but not identical.
When comparing T-bills, commercial paper, or bankers' acceptances (quoted on discount basis) to Treasury notes, bonds, or CDs (quoted on yield basis). BEY puts all instruments on the same footing for yield comparison.
Higher BEY means higher return before accounting for credit risk and liquidity. A corporate bond with higher BEY than a T-bill reflects additional risk — credit risk (possibility of default), liquidity risk (harder to sell quickly), and call risk (may be redeemed early). Always compare after adjusting for risk.