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The overnight Fed Funds rate is 3.47%. Please convert that to a bond equivalent yield. Answer in percent to three decimal pla

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Answer #1

Overnight Fed Funds Rate = 3.47%

Daily Rate = 3.47 / 365

Effective Annual Yield = EAY = [1+(0.0347/365)]^(365) - 1 = 0.03458 or 3.458 %

Semi-Annual Effective Yield = (1.03458)^(1/2) - 1 = 0.01714 or 1.714 %

BEY = 2 x Semi-Annual Effective Yield = 2 x 0.01714 = 0.03429 or 3.429 % ~ 3.43 %

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