Hey everyone Has anyone come across a cash flow yield question. It’s part of FI i believe. If anyone can put up a question regarding the topic that would be awesome or just explain how to calculate it as what would be given and what are you supposed to do? Thanks
cash flow yeild is for the securities which pay monthly payments like mbs and abs…therefore, given a rate, formula to convert it into a regular bond equivalent yeild is… {[(1 + cfy)^6]-1} x 2 …i guess dats correct unless i am out of my brain thinkin and worryin abt the real exam…
CFAI v5 page 402 it is yield that makes PV of future CF equal to price of the CF. The CF equals to sum of interest and pricnicpal partial prepayments. You project those prepayments if unknown. and there is this stupid BEY recalculation. In my view it is the yield to maturity or irr or discount rate or whatever …
Ohh…so you just take the series of CFs find the IRR? and then convert it from a monthly rate to a BEY?