DEFINITION of 'Coupon Equivalent Yield - CEY'

A method of calculation used to calculate the yield on bonds with maturities of less than one year and which normally sell at a discount and do not pay coupons.

Formula

Coupon Equivalent Yield (CEY)

BREAKING DOWN 'Coupon Equivalent Yield - CEY'

For example, the CEY calculation allows bond investors to compare the return on a 180-day Treasury bill to a one-year coupon paying bond, to evaluate which instrument will give the investor a higher return.


RELATED TERMS
  1. Coupon Rate

    The yield paid by a fixed income security. A fixed income security's ...
  2. Average Price

    The average price is sometimes used in determining a bond's yield ...
  3. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
  4. Bond Valuation

    Bond valuation is a technique for determining the theoretical ...
  5. Coupon Equivalent Rate - CER

    A alternative calculation of coupon rate used to compare zero-coupon ...
  6. Coupon Bond

    A debt obligation with coupons attached that represent semiannual ...
Related Articles
  1. Investing

    Comparing Yield To Maturity And The Coupon Rate

    Investors base investing decisions and strategies on yield to maturity more so than coupon rates.
  2. Investing

    Explaining the Coupon Rate

    Coupon rate is the stated interest rate on a fixed income security.
  3. Investing

    How Do I Calculate Yield To Maturity Of A Zero Coupon Bond?

    Yield to maturity is a basic investing concept used by investors to compare bonds of different coupons and times until maturity.
  4. Investing

    How Does A Bond’s Coupon Interest Rate Affect Its Price?

    All bonds come with a coupon interest rate, which is the fixed annual interest a bond pays.
  5. Investing

    Understanding the Different Types of Bond Yields

    Any investor, private or institutional, should be aware of the diverse types and calculations of bond yields before an actual investment.
  6. Investing

    5 Basic Things To Know About Bonds

    Learn these basic terms to breakdown this seemingly complex investment area.
  7. Financial Advisor

    Present Value Of Different Bond Types Using Excel

    To determine the value of a bond today - for a fixed principal (par value) to be repaid in the future - we can use an Excel spreadsheet.
  8. Personal Finance

    Coupon Shopping: Clip Your Way To Savings

    Use coupons strategically to score big savings on everyday purchases.
RELATED FAQS
  1. What is the relationship between current yield and yield to maturity (YTM)?

    Learn about the relationship between a bond's current yield and its yield to maturity, including how the market price of ... Read Answer >>
  2. How can I use the holding period return yield to determine whether or not I should ...

    Find out how to use the holding period return yield formula to determine whether it is a good time to sell your bond based ... Read Answer >>
  3. How do I use the holding period return yield to evaluate my bond portfolio?

    Find out how to use the holding period return yield formula to evaluate the performance of bonds in your portfolio, and view ... Read Answer >>
  4. How does a bond's coupon interest rate affect its price?

    Find out why the difference between the coupon interest rate on a bond and prevailing market interest rates has a large impact ... Read Answer >>
  5. When is a bond's coupon rate and yield to maturity the same?

    Find out when a bond's yield to maturity is equal to its coupon rate, and learn about the components of bonds and how they ... Read Answer >>
Hot Definitions
  1. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  2. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an insurance and an investment component. The insurance component ...
  3. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  4. Capital Asset Pricing Model - CAPM

    A model that describes the relationship between risk and expected return and that is used in the pricing of risky securities. ...
  5. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability of potential investments.
  6. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
Trading Center