Which of the following statements is true?
A) Discount yield is always lower than bond equivalent yield on the same security.
B) Discount yield is always higher than bond equivalent yield on the same security.
C) Discount yield is always equal to bond equivalent yield on the same security.
D) Discount yield can be lower or higher than bond equivalent yield on the same security.

Question

Quizplus · Accepted Answer

Discount yield is calculated on a 360-day basis and does not account for compounding, while bond equivalent yield is calculated on a 365-day basis and does account for compounding, making the bond equivalent yield typically higher.

Which of the Following Statements Is True