Financial calculator zero coupon bond

Zero Coupon Bond Yield Calculator

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Icalc - easy to calculate. We Create Awesome Calculators. Parent Category: The Calculator helps calculating the Price of Zero-Coupon Bond A zero-coupon bond also discount bond or deep discount bond is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity.

Zero-Coupon Bond - Full Explanation & Example | InvestingAnswers

Contact Form Do you have questions or comments for us? Although the lack of current income provided by zero-coupons bond discourages some investors, others find the securities ideal for meeting long-range financial goals like college tuition. The deep discount helps the investor grow a small amount of money into a sizeable sum over several years.

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Because zero-coupon bonds essentially lock the investor into a guaranteed reinvestment rate , purchasing zero-coupon bonds can be most advantageous when interest rates are high. They are also more advantageous when placed in retirement accounts where they remain tax-sheltered. Some investors also avoid paying taxes on imputed interest by buying municipal zero-coupon bonds, which are usually tax-exempt if the investor lives in the state where the bond was issued. The lack of coupon payments on zero-coupon bonds means their worth is based solely on their current price compared to their face value.

How do I calculate yield to maturity of a zero-coupon bond?

Thus, prices tend to rise faster than the prices of traditional bonds when interest rates are falling, and vice versa. The locked-in reinvestment rate also makes them more attractive when interest rates fall.

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Show 5 More. Our in-depth tools give millions of people across the globe highly detailed and thoroughly explained answers to their most important financial questions. Each month, more than 1 million visitors in countries across the globe turn to InvestingAnswers. Financial Dictionary Calculators Articles. Zero-Coupon Bond.

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