Coupon equivalent yield

Similar financial terms

Coupon rate
The interest rate that the issuer of a bond agrees to pay each year to the bondholder. The coupon rate multiplied by the principal of a bond provides the nominal amount of the coupon. For example, a bond with a 5.1% coupon rate and a principal of $1,000 provides an annual interest of $51. The coupon rate is also referred to as the nominal rate.

Coupon
The annual amount of the interest payment made to owners during the term of the bond.

Zero-coupon bonds
The holder of a zero-coupon bond realizes interest by buying the bond at a discount to its principal value. These bonds made their debut in the U.S. bond market in the early 1980s.

Deferred-coupon bonds
Bonds that let the issuer avoid using cash to make interest payments for a specified number of years. There are three types of deferred-coupon structures: (a) deferred-interest bonds, (b) step-up bonds and (c) payment-in-kind bonds.

Zero-coupon interest rate
The interest rate that would be earned on a bond that provides no coupons.

Zero-coupon convertible
A zero-coupon bond convertible into the common stock of the issuing company after the stock reaches a certain price, using a put option inherent in the security. It might as well refer to zero-coupon bonds, which are convertible into an interest bearing bond at a certain time before maturity.

Weighted average coupon
The weighted average of the gross interest rate of the mortgages underlying the pool as of the pool issue date, with the balance of each mortgage used as the weighting factor.

Pass-through coupon rate
The interest rate paid on a securitized pool of assets, which is less than the rate paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.

Low-coupon bond refunding
Refunding of a low coupon bond with a new, higher coupon bond.

Long coupons
(a) Bonds or notes with a long current maturity. (b) A bond on which one of the coupon periods, usually the first, is longer than the other periods or the standard period.

Level-coupon bond
Bond with a stream of coupon payments that are the same throughout the life of the bond.

Coupon payments
A bond's interest payments.

Current coupon
A bond selling at or close to par, that is, a bond with a coupon close to the yields currently offered on new bonds of a similar maturity and credit risk.

Bond equivalent yield
Bond yield calculated on an annual percentage rate method. Differs from annual effective yield.

Bond-equivalent basis
The method used for computing the bond-equivalent yield.

Bond-equivalent yield
The annualized yield to maturity computed by doubling the semiannual yield.

Cash and equivalents
The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as government bonds and Banker's Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Cash equivalent
A short-term security that is sufficiently liquid that it may be considered the financial equivalent of cash.

Cash-equivalent items
Temporary investments of currently excess cash in short-term, high-quality investment media such as treasury bills and Banker's Acceptances.

Certainty equivalent
An amount that would be accepted in lieu of a chance at a possible higher, but uncertain, amount.

Common stock equivalent
A convertible security that is traded like an equity issue because the optioned common stock is trading high.

Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to maturity that the premium or discount bond quoted would.

Yield to maturity
The total yield on a bond obtained by equating the bond's current market value to the discounted cash flows promised by the bond. Also referred to as actuarial yield or just yield.

Yield curve
The yield curve, which plots the term structure, shows the relationship between yield (interest rate) and maturity for a set of similar securities. Typically, different yield curves are drawn for zero-coupon bonds (zero-coupon yield curve) and for coupon bonds quoted at par (par yield curve).

Yield
In general, the yield is the return on an investor's capital investment. For bonds it is the coupon rate of interest divided by the purchase price, called current yield. Also, the rate of return on a bond, taking into account the total of annual interest payments, the purchase price, the redemption value, and the amount of time remaining until maturity.

Dividend yield
A stock's daily percentage summary of yield, calculated by dividing annual dividend per share by the day's closing stock price.

Yield to call
The percentage rate of a bond or note, if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time to the call and the market price.

Yield spread strategies
Strategies that involve positioning a portfolio to capitalize on expected changes inyield spreads between sectors of the bond market.

Yield ratio
The quotient of two bond yields.

Yield curve strategies
Positioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve.

Yield curve option-pricing models
Models that can incorporate different volatility assumptions along the yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.

Weighted average portfolio yield
The weighted average of the yield of all the bonds in a portfolio.

Annual percentage yield (APY)
The effective, or true, annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an APY of 12.68% (1.01^12).

Steepening of the yield curve
A change in the yield curve where the spread between the yield on a long-term and short-term Treasury has increased.

Riding the yield curve
Buying long-term bonds in anticipation of capital gains as yields fall with the declining maturity of the bonds.

Required yield
Generally referring to bonds, the yield required by the marketplace to match available returns for financial instruments with comparable risk.

Reoffering yield
In a purchase and sale, the yield to maturity at which the underwriter offers to sell the bonds to investors.

Relative yield spread
The ratio of the yield spread to the yield level.

Realized compound yield
Yield assuming that coupon payments are invested at the going market interest rate at the time of their receipt and rolled over until the bond matures.

Pure yield pickup swap
Moving to higher yield bonds.

Parallel shift in the yield curve
A shift in the yield curve in which the change in the yield on all maturities is the same number of basis points. In other words, if the 3 month T-bill increases 100 basis points (one percent), then the 6 month, 1 year, 5 year, 10 year, 20 year, and 30 year rates increase by 100 basis points as well.

Non-parallel shift in the yield curve
A shift in the yield curve in which yields do not change by the same number of basis points for every maturity.

Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co.

Capital gains yield
The price change portion of a stock's return.

Convenience yield
The extra advantage that firms derive from holding the commodity rather than the future.

Current yield
For bonds or notes, the coupon rate divided by the market price of the bond.

Yield to worst
The bond yield computed by using the lower of either the yield to maturity or the yield to call on every possible call date.

Yield burning
A municipal bond financing method. Underwriters in advance refundings add large markups on US Treasury bonds bought and held in escrow to compensate investors while waiting for repayment of old bonds after issuance of the new bonds. Since bond prices and yields move in opposite directions, when the bonds are marked up, they "burn down" the yield, which may violate federal tax rules and diminishes tax revenues.