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Effective Yield Calculator

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Basics of Financial Accounting Asset Management

✖Nominal Rate refers to the interest rate before taking inflation into account.ⓘ Nominal Rate [NR]			+10% -10%
✖Number of Payments Per Year is the count on the paymenst made for the interest on bond in a particular year.ⓘ Number of Payments Per Year [n_PYr]			+10% -10%

✖Effective Yield refers to the yield of a bond where the bondholder reinvests its interest payments, or coupons, at the same rate.ⓘ Effective Yield [i]

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Effective Yield Solution

STEP 0: Pre-Calculation Summary

Formula Used

Effective Yield = 1+(Nominal Rate/Number of Payments Per Year)^(Number of Payments Per Year)-1
i = 1+(NR/n_PYr)^(n_PYr)-1
This formula uses 3 Variables

Variables Used

Effective Yield - Effective Yield refers to the yield of a bond where the bondholder reinvests its interest payments, or coupons, at the same rate.
Nominal Rate - Nominal Rate refers to the interest rate before taking inflation into account.
Number of Payments Per Year - Number of Payments Per Year is the count on the paymenst made for the interest on bond in a particular year.

STEP 1: Convert Input(s) to Base Unit

Nominal Rate: 19 --> No Conversion Required
Number of Payments Per Year: 3.2 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

i = 1+(NR/n_PYr)^(n_PYr)-1 --> 1+(19/3.2)^(3.2)-1

Evaluating ... ...

i = 298.903907444971

STEP 3: Convert Result to Output's Unit

298.903907444971 --> No Conversion Required

FINAL ANSWER

298.903907444971 ≈ 298.9039 <-- Effective Yield

(Calculation completed in 00.020 seconds)

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Created by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

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Satyawati College (DU), New Delhi

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Effective Yield Formula

LaTeX Go

Effective Yield = 1+(Nominal Rate/Number of Payments Per Year)^(Number of Payments Per Year)-1
i = 1+(NR/n_PYr)^(n_PYr)-1

What is Effective Yield?

Effective yield is the total yield an investor receives, in contrast to the nominal yield which is the stated interest rate of the bond's coupon. Effective yield takes into account the power of compounding on investment returns, while nominal yield does not.
The effective yield is a measure of the coupon rate, which is the interest rate stated on a bond and expressed as a percentage of the face value. Coupon payments on a bond are typically paid semi-annually by the issuer to the bond investor. This means that the investor will receive two coupon payments per year. Effective yield is calculated by dividing the coupon payments by the current market value of the bond.

How to Calculate Effective Yield?

Effective Yield calculator uses Effective Yield = 1+(Nominal Rate/Number of Payments Per Year)^(Number of Payments Per Year)-1 to calculate the Effective Yield, The Effective Yield formula is defined as the return on a bond that has its interest payments (or coupons) reinvested at the same rate by the bondholder. Effective Yield is denoted by i symbol.

How to calculate Effective Yield using this online calculator? To use this online calculator for Effective Yield, enter Nominal Rate (NR) & Number of Payments Per Year (n_PYr) and hit the calculate button. Here is how the Effective Yield calculation can be explained with given input values -> 298.9039 = 1+(19/3.2)^(3.2)-1.

FAQ

What is Effective Yield?

The Effective Yield formula is defined as the return on a bond that has its interest payments (or coupons) reinvested at the same rate by the bondholder and is represented as i = 1+(NR/n_PYr)^(n_PYr)-1 or Effective Yield = 1+(Nominal Rate/Number of Payments Per Year)^(Number of Payments Per Year)-1. Nominal Rate refers to the interest rate before taking inflation into account & Number of Payments Per Year is the count on the paymenst made for the interest on bond in a particular year.

How to calculate Effective Yield?

The Effective Yield formula is defined as the return on a bond that has its interest payments (or coupons) reinvested at the same rate by the bondholder is calculated using Effective Yield = 1+(Nominal Rate/Number of Payments Per Year)^(Number of Payments Per Year)-1. To calculate Effective Yield, you need Nominal Rate (NR) & Number of Payments Per Year (n_PYr). With our tool, you need to enter the respective value for Nominal Rate & Number of Payments Per Year and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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