Hello, you have shown true yield is less than street convention, but what if the bond works on a modified following. In that case the street convention would be less,isn't it correct?
In semi annual compounding, you get your coupon payments at a shorter time period. Since, that makes semi annual compounding more liquid than annual compounding it's yeild is less. Annual Compounding needs to gives a higher yield to account for liquidity risk (more illiquid an asset more money you want from it).
you always simplify everything for me. Thanks
Very nice video for revision of level 1 concepts
Simplest explanation
Glad you found it useful. utkarsh
Hello, you have shown true yield is less than street convention, but what if the bond works on a modified following. In that case the street convention would be less,isn't it correct?
Street convention and true yield are only for fixed-rate bonds
How to enter values in the calculator using annual compounding in BEY calculation.
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How can i calculate BEY on excel?
why is bey is less than eay?
In semi annual compounding, you get your coupon payments at a shorter time period. Since, that makes semi annual compounding more liquid than annual compounding it's yeild is less. Annual Compounding needs to gives a higher yield to account for liquidity risk (more illiquid an asset more money you want from it).
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