equivalent bond yield

Equivalent bond yield

Effective annual yield on a short-term, noninterest-bearing security calculated for comparison to yields quoted on coupon securities.

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Equivalent Bond Yield

An alternative method of calculating the yield on a bond. It is used for zero-coupon bonds, as these are issued at discounts to their face value, that is, the equivalent bond yield states what the yield would be if it carried a coupon and had been sold at face value. As such, it provides a more accurate picture of the yield of a zero-coupon bond. See also: Coupon-equivalent rate.

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equivalent bond yield

The annual yield on a short-term security that is usually quoted on a bank-discount basis to make the yield comparable with quotations on other interest-bearing debt.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.