Bond Equivalent Yield — Smart Financial Analysis
Convert discount-basis securities to annualized bond terms. Compare T-Bills, CDs, and commercial paper.
Did our AI summary help? Let us know.
Bond Equivalent Yield (BEY) converts discount-basis securities like T-Bills to an annualized yield comparable to coupon-paying bonds. BEY = (Face - Purchase Price) / Purchase Price × (365 / Days to Maturity). BEY uses simple interest; EAY accounts for compounding. T-Bills are sold at a discount and mature at par.
Ready to run the numbers?
Why: Bond Equivalent Yield (BEY) converts discount-basis securities like T-Bills to an annualized yield comparable to coupon-paying bonds. BEY = (Face - Purchase Price) / Purchase Pr...
How: Enter Face Value ($), Purchase Price ($), Days to Maturity to get instant results. Try the preset examples to see how different scenarios affect the outcome, then adjust to match your situation.
Run the calculator when you are ready.
Bond Equivalent Yield — Translating T-Bill Returns to Bond Terms
T-Bills quote discount yields; bonds quote coupon yields. BEY bridges the gap for the $24T+ T-Bill market.
📋 Example Scenarios — Click to Load
T-Bill / Discount Security Inputs
BEY Comparison by Maturity
BEY vs EAY
Discount Yield vs BEY
Short-Term Rate Comparison
For educational purposes only — not financial advice. Consult a qualified advisor before making decisions.
💡 Money Facts
Bond Equivalent Yield analysis is used by millions of people worldwide to make better financial decisions.
— Industry Data
Financial literacy can increase household wealth by up to 25% over a lifetime.
— NBER Research
The average American makes 35,000 financial decisions per year—many can be optimized with calculators.
— Cornell University
Globally, only 33% of adults are financially literate, making tools like this essential.
— S&P Global
Bond Equivalent Yield (BEY) converts discount-basis securities (like T-Bills) to an annualized yield for comparison with coupon-paying bonds. BEY = (Face - Purchase Price) / Purchase Price × (365 / Days to Maturity). A 90-day T-Bill purchased at $9,800 for $10K face → BEY = 8.28%. BEY uses simple interest (365-day year), unlike EAY which compounds. The US Treasury market ($24 TRILLION+) relies on BEY for short-term securities. BEY is always slightly LOWER than EAY because it doesn't account for reinvestment.
📈 By the Numbers
📋 Key Takeaways
- • BEY = (Face − Purchase Price) / Purchase Price × (365 / Days to Maturity)
- • BEY uses 365-day year (vs 360 for bank discount yield)
- • BEY annualizes on simple interest basis — no compounding
- • EAY > BEY > discount yield for the same instrument
📐 How It Works
- BEY Formula: (Face − Purchase Price) / Purchase Price × (365 / Days). Annualizes the holding-period return on a simple interest basis.
- BEY vs Discount Yield: Discount yield uses face value and 360-day year; BEY uses purchase price and 365-day year. BEY is always higher for the same instrument.
- BEY vs EAY: EAY accounts for compounding; BEY does not. For short maturities the difference is small; for longer maturities EAY exceeds BEY.
💡 Tips
- Use BEY when comparing T-Bills to CDs or bonds — convert all yields to BEY for apples-to-apples.
- Watch the day count: 360 vs 365 matters — bank discount understates true return vs BEY.
- Treasury Direct publishes T-Bill yields in both discount and investment (BEY) terms.
- For 6-month instruments, BEY vs money market yield differs by ~5-10 bps — small but material.
📊 Yield Convention Comparison
| Convention | Base | Year | Compounding |
|---|---|---|---|
| BEY | Purchase Price | 365-day | Simple |
| Bank Discount Yield | Face Value | 360-day | Simple |
| Money Market Yield | Purchase Price | 360-day | Simple |
| Effective Annual Yield | Purchase Price | 365-day | Compounded |
❓ Frequently Asked Questions
What is bond equivalent yield?
Bond Equivalent Yield (BEY) converts discount-basis securities like T-Bills to an annualized yield comparable to coupon-paying bonds. BEY = (Face - Purchase Price) / Purchase Price × (365 / Days to Maturity). It uses simple interest and a 365-day year so you can compare T-Bills to bonds and CDs.
What is the BEY formula?
BEY = (Face - Purchase Price) / Purchase Price × (365 / Days to Maturity). Example: $10K face, $9,800 purchase, 90 days → BEY = (200/9800) × (365/90) = 8.28%. The formula annualizes the holding-period return on a simple interest basis.
BEY vs effective annual yield?
BEY uses simple interest; EAY accounts for compounding. For the same T-Bill, EAY is slightly higher. Example: 8.28% BEY with 90-day maturity → EAY ≈ 8.51% because EAY assumes reinvestment of interim cash flows.
BEY for T-Bills?
T-Bills are sold at a discount and mature at par. The US Treasury and money markets quote discount yield (360-day, face-value base). BEY converts that to a 365-day, purchase-price basis so you can compare T-Bill returns to bonds and CDs.
Comparing different maturity bonds?
BEY annualizes short-term returns for apples-to-apples comparison. A 90-day T-Bill at 8.28% BEY vs a 182-day T-Bill at 7.28% BEY — the short-term wins on an annualized basis. BEY lets you rank securities across maturities.
BEY limitations?
BEY ignores compounding, so it understates true return vs EAY. It assumes a 365-day year (actual/actual). For very short maturities the gap is small; for longer maturities EAY exceeds BEY. BEY is best for comparison, not absolute return.
💡 Did You Know?
📚 Sources
- • Treasury Direct
- • Federal Reserve
- • CFA Institute
- • Bloomberg
Disclaimer: This calculator provides estimates based on Treasury Direct and Federal Reserve methodology. Actual T-Bill auction results may vary. Not financial advice.
Related Calculators
Bond Convexity Calculator
Calculate bond duration, convexity, and analyze bond price sensitivity to interest rate changes with comprehensive price-yield curve visualization.
FinanceBond Duration Calculator
Calculate Macaulay duration, modified duration, and convexity for bonds to analyze interest rate sensitivity.
FinanceEffective Duration Calculator
Calculate effective duration to analyze a bond's sensitivity to interest rate changes and accurately measure price risk.
FinanceBond Price Calculator
Calculate bond prices, clean and dirty prices, duration, and convexity based on coupon rate, yield to maturity, and time to maturity.
FinanceBond Yield Calculator
Calculate different bond yield metrics including current yield, yield to maturity (YTM), bond equivalent yield, and effective annual yield for fixed income...
FinanceCoupon Payment Calculator
Calculate bond coupon payments, schedule, and analyze after-tax income for different bond types.
Finance