What Is Effective Rate of Return?

The annual effective rate of return refers to the yield of a bond within one year in consideration of various compound interest situations. The annual effective rate of return reflects the actual rate of return, which can be easily compared with the rate of return of other bonds.

Annual effective rate of return

Right!
The annual effective rate of return refers to the yield of a bond within one year in consideration of various compound interest situations. The annual effective rate of return reflects the actual rate of return, which can be easily compared with the rate of return of other bonds.
Calculation formula of annual effective rate of return
Example: Zero coupon bonds, maturing in 2 years, F = 1000, P = 850. Equity yield of bonds?
So y / 2 = 4.145% and y = 8.29%.
Annual effective yield of bonds?
(1 + 4.145%) 2 1 = 8.46% [1]

IN OTHER LANGUAGES

Was this article helpful? Thanks for the feedback Thanks for the feedback

How can we help? How can we help?