Break-Even Yield

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Break-Even Yield

The yield necessary to cover costs and prevent a firm from operating at a loss. The breakeven yield may be relatively stable or it may fluctuate, depending on the company or industry. Companies with high breakeven yields tend to have large fluctuations in earnings from year to year. Calculating the breakeven yield is an important part of risk analysis.
References in periodicals archive ?
From our prior analyses, we have shown that a relatively simple breakeven analysis can be constructed that shows the breakeven yield (BEY) that investors must be promised in order to compensate for actual or expected default rates and recovery rates.
When we calculate Premium above the Breakeven Yield as of December 31, 1999, assuming a three, four, or, or five percent default rate and various recovery rates, the results are as follows (a risk free rate = 6.
We can observe that under all scenarios, the breakeven yield premium is positive but, except for the three percent default rate and fifty percent recovery rate assumptions, in all of the scenarios the premium is below the historical return spread (2.