Everything else equal,an effective annual rate will be greater than the bond equivalent yield on the same security.

Name: Everything else equal,an effective annual rate will be greater than the bond equivalent yield on the same security.
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Question

Quizplus · Accepted Answer

An effective annual rate (EAR) takes into account the compounding of interest, while a bond equivalent yield (BEY) assumes no compounding. Therefore, the EAR will always be greater than the BEY on the same security, all else being equal.

Everything Else Equal,an Effective Annual Rate Will Be Greater Than