Enter the face value, bond yield rate, and time to maturity into the calculator to determine the zero-coupon bond.

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?

1. First, determine the face value.

Calculate or determine the face value of the bond.

2. Next, determine the yield.

Determine the rate/yield of the bond.

3. Next, determine the time to maturity.

Calculate the number of years until maturity.

4. Finally, calculate the value.

Calculate the value of the bond using the equation above.

FAQ

What is a zero coupon bond?

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.