Enter the face value, bond yield rate, and time to maturity into the calculator to determine the zero-coupon bond.
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Zero Coupon Bond Formula
The following formula is used to calculate the value of a zero-coupon bond.
ZCBV = F / (1+r)^t
- where ZCBV is the zero-coupon bond value
- F is the face value of the bond
- r is the yield/rate
- t is the time to maturity
To calculate a zero coupon bond value, divide the face value by 1 plus the rate raised to the power of the time to maturity.
Zero Coupon Bond Definition
A zero-coupon bond is a security that does not pay interest but trades at a discount and renders a profit at maturity when the bond is redeemed for its face value.
Zero Coupon Bond Example
How to calculate a zero coupon bond value?
- First, determine the face value.
Calculate or determine the face value of the bond.
- Next, determine the yield.
Determine the rate/yield of the bond.
- Next, determine the time to maturity.
Calculate the number of years until maturity.
- Finally, calculate the value.
Calculate the value of the bond using the equation above.
A zero coupon bond is a bond that does not pay interest but can be redeemed from a profit at it’s time of maturity.