The effective annual yield is the real return on an interest-paying investment after factoring in the effects of compounding. It is mainly used to calculate the total yield an investor receives, in contrast to the bond’s stated interest rate.
Other related topics you might be interested to explore are Holding Period Yield, Bank Discount Yield, and Money Market Yield.
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Effective annual yield is among the topics included in the Quantitative Methods module of the CFA Level 1 Curriculum.
