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# What is a zero coupon bond formula

Determine the number of time periods years in this case remaining until the bond matures. For example, if the bond issuer will pay the bond holder the face value of the bond in five years, then the time-to-maturity is five.

## The Zero Coupon Bond: Pricing and Charactertistics

Take the sum calculated in Step 1 above and raise it to the power of the remaining time period. Thus, 1. On a calculator, you would multiply 1. Divide the par face value of the bond by the result of the previous step. The par value of the bond is the amount that the bond issuer will pay to the bond holder when the bond matures. Include your email address to get a message when this question is answered. Already answered Not a question Bad question Other. Warnings Make sure that the required rate of return and the number of time periods remaining until maturity are measured in the same units of time.

In the above example, the stated interest rate was an annual one, and the number of time periods until maturity was measured in years. Things You'll Need Calculator. Note : In above formula, B4 is the interest rate, B3 is the maturity year, 0 means no coupon, B2 is the face value, and you can change them as you need.

You can calculate the price of this annual coupon bond as follows:. Sometimes, bondholders can get coupons twice in a year from a bond. In this condition, you can calculate the price of the semi-annual coupon bond as follows:. How to create loan amortization interest calculator of Excel template?

## Zero Coupon Bond: Definition, Formula & Example | nityfyvy.ml

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## Price of a zero coupon bond

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• Zero Coupon Bond (Definition, Formula, Examples, Calculations).