CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

Given a 30-day horizon, a holding period yield of 0.33445% produces an equivalent annual yield of ______.

A. 4.1460%
B. 4.0134%
C. 3.9016%
Correct Answer: A

HPY -> EAY
EAY = (1.0033445)365/30 - 1 = 4.1460%

User Contributed Comments 12

User Comment
wuyi why use 365 days? not 360 days?
raychow what is equivalent annual yield?
Indira because by definition EAR is annualized on the basis of 365 days, not 360.
Indira "equivalent" means matched to HPY
Winner on the BA II how do you do the funtion to the power or 365/30? For example what are the key stroke for this problem, (1.0033445)^365/30
pierreE14 hi winner
key in 1.0033445
y^x
(365/30)
=
BandB why is it the EAY instead of the Money Market Yield? Thanks.
reganbaha Because all of the answers to choose from are stated as EAY.
loisliu88 this question is a bit ambiguous. first I thought it asked for a Bond Equivalent Annual Yield. because there are two ways to annulize a periodic rate. one is EAY and another is Bond Equivalent yield.
shinnie so...equivalent annual yield = effective annual yield?
obuyajosh Another way on BA II plus:
=> 2nd ICONV
=> 0.33445* (360/30) press enter
=> down arrow twice to C/Y
=> 360/30 press enter
=>press up arrow to EFF and press CPT to give 4.1599
MathLoser Don't you even check? It's 365, not 360.
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