Bond Equivalent Yield Calculator

The bond equivalent yield (BEY) is an annualized rate of return used to compare the yield of discount bonds — such as zero-coupon bonds and Treasury bills — with other investments on a common annual basis. It expresses the return you earn from the difference between a bond's purchase price and its face value, scaled up to a full year.

The BEY formula is: BEY = ((Face Value − Purchase Price) / Purchase Price) × (365 / Days to Maturity). The first part calculates the percentage return on your investment, and multiplying by 365 divided by the days to maturity annualizes that return so it can be compared to yearly yields.

BEY allows investors to compare bonds with different maturities on a level playing field. For example, a 90-day T-bill and a 180-day T-bill have different holding periods, but converting both to a BEY lets you directly compare their annualized returns and make better investment decisions.

Not exactly. BEY is a simplified annualization of the discount bond's return and does not account for compounding or reinvestment of coupon payments. Yield to maturity is a more comprehensive measure that factors in the time value of money and all cash flows. BEY is best suited for zero-coupon or discount bonds with no periodic coupon payments.

A zero-coupon bond is a type of bond that pays no periodic interest (coupon) payments. Instead, it is sold at a discount to its face value, and the bondholder receives the full face value at maturity. The return comes entirely from the difference between the purchase price and the face value.

The face value (also called par value or principal) is the amount the bond issuer promises to repay the bondholder at maturity. For example, a bond with a face value of $1,000 means you will receive $1,000 when the bond matures, regardless of what you paid for it.

For the BEY formula to produce a positive yield, the purchase price must be lower than the face value — this is what makes it a discount bond. If the purchase price equals or exceeds the face value, the bond equivalent yield would be zero or negative, which is not typical for traditional discount bonds.

BEY uses a 365-day year convention (actual/365), which is standard for comparing bond yields in the U.S. Some money market instruments use a 360-day year. Using 365 days makes BEY slightly higher than yields calculated on a 360-day basis, which is important to keep in mind when comparing different instruments.