Bond Equivalent Yield Calculator
We have prepared this bond equivalent yield calculator to help you calculate your bond investment's annual yield. This metric is very useful in analyzing the principal returns of your bond investments, especially for zerocoupon bonds.
This article will help you understand what the bond equivalent yield is and how to calculate it using the bond equivalent yield formula. We will also demonstrate some calculation examples to help you understand the concept.
What is the bond equivalent yield (BEY)? The bond equivalent yield calculator
The bond equivalent yield formula, also known as the BEY formula, is one of the many ways to analyze the return on a bond investments. To be more specific, the BEY compares the principal payment to the bond price. Thus, it tells you how much return you can get through receiving the principal after purchasing the bond.
As this metric focuses on the principal payment of a bond, it is particularly suitable to analyze bonds that do not pay coupons to their investors. These bonds are called zerocoupon bonds. We will explain this concept further with the bond equivalent yield calculation example below. Check our coupon payment calculator if you are more interested in bonds with coupons.
How to calculate bond equivalent yield (BEY)? Bond equivalent yield formula
To explore the bond equivalent yield calculator, let's take Bond A issued by Company Alpha, as an example. It has the following data:
 Bond price: $980 (estimate it by our bond price calculator)
 Face value: $1,000; and
 Days to maturity: 300 days.
To calculate the bond equivalent yield, you need to perform the following 4 steps:
 Determine the bond price
You can easily obtain the
bond price
of any bond on the market as they are all publicly available. In our example, thebond price
of Bond A is$980
.
 Determine the face value of the bond
The
face value
of the bond is the principal amount you will receive when the bond matures. Theface value
of Bond A is$1,000
.
 Determine the bond's number of days to maturity
The
days to maturity
is defined as the number of days left until the bond matures. Thedays to maturity
for Bond A is300 days
.
 Calculate the bond equivalent yield (BEY)
The last step is to calculate the
BEY
using the bond equivalent yield formula shown below:
BEY = (face value  price) / price * (365 / days to maturity)
Using the BEY formula, the
BEY
for Bond A is($1,000  $980 / $980) * (365 / 300) = 2.48%
.
Don't worry if you are still feeling confused, just use our bond equivalent yield calculator to calculate it.
The bond equivalent yield in practice. Why is bond equivalent yield useful?
Now that we understand how to calculate the bond equivalent yield, let's talk about the importance of this metric:

The bond equivalent yield calculation is most useful when analyzing zerocoupon bonds. This is because zerocoupon bonds do not pay any coupons to the investor.

Thus, the bond equivalent yield can better represent the return of a zerocoupon yield as BEY only considers the principal payment of the bond.

Also, when calculating the bond equivalent yield of a zerocoupon bond, the metric helps you compare the zerocoupon bonds to some financial securities with annual yields, such as bonds with coupon payments.
FAQ
What is a bond?
A bond is a debt security, usually issued by a government or a corporation, that is sold to investors. The investors will lend the money to the bond issuer by buying the bond. The investors will then receive their returns by receiving coupons throughout the life of the bond as well as the face value when the bond matures.
What is face value?
The face value is defined as the amount of money the bond investor will receive at the maturity date if the bond issuer does not default. It is also called the principal. It is also the last payment a bond investor will receive if the bond is held to maturity.
What is a coupon?
A coupon is considered to be the interest payment of a bond. It is defined as the product of the coupon rate and the face value of the bond.
Does bond equivalent yield equal yield to maturity?
The short answer is no, bond equivalent yield doesn't equal yield to maturity. The yield to maturity is the annual rate of return of a bond investment, taking into account both the returns from coupon and principal payments. On the other hand, the bond equivalent yield only considers the principal return.
How do I find the bond equivalent yield?
You can calculate the bond equivalent yield in four steps:
 Determine the bond price.
 Determine the face value of the bond.
 Determine the number of days to maturity of the bond.
 Apply the bond equivalent yield (BEY) formula:
BEY = (face value  price) / price * (365 / days to maturity)