- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 7. Yield and Yield Spread Measures for Fixed-Rate Bonds
- Subject 1. Periodicity and Annualized Yields

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**CFA Practice Question**

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

II. semi-annual bond equivalent yield

III. yield per semi-annual period

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.

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