An annual rate with a periodicity of two is known as a ______.

I. semi-annual bond basis yield
II. semi-annual bond equivalent yield
III. yield per semi-annual period

Correct Answer: I and II

An important factor in yield determination and interpretation is the frequency of compounding, known as periodicity. All else equal, more frequent compounding results in greater future values or returns. Therefore, compounding more frequently at a lower rate can be equivalent to compounding less frequently at a higher rate; the more frequent compounding makes up for the lower rate.