Example 5 – Using the RATE Function to Calculate the Interest Rate for a Zero Coupon Bond We will use the RATE function to calculate the Yield to Maturity-YTM (r), which is the interest rate (r) for a zero coupon bond. Steps: Use the following function in cell C8. =RATE(C7,0,C6...
On this page is a zero coupon bond calculator, to calculate the market price or fair value of a zero coupon bond of known time to maturity, par or face value, and interest rate. Zero Coupon Bond CalculatorTable of Contents show ▼ ...
Since the Interest accrued is discounted from the Par value of such Bonds at purchase, which effectively enables Investors of Zero Coupon Bonds to buy a greater number of such bonds compared to any other Coupon Bearing Bond. Formula Let us understand the formula to use azero coupon bond calcul...
annual compounding Maturity 5 years Corporate tax rate 40.00% Issue price $747.26 ANALYSIS Analysis of a Zero Coupon Bond from Issuer’s Perspective 0 1 6% 2 3 4 5 Years $1,000.00 56.60 22.64 977.36 $943.40 53.40 21.36 21.36 $890.00 50.38 20.15 20.15 $839.62 47.52 19.01 19.01 $792.10 44.84...
Using a Taylor Series expansion, for a variation of the interest rate, the variation in the value of the bond can be estimated from: 2.1 Zero-Coupon Bond: The value of a zero coupon bond is: The Macaulay Duration of a zero-coupon bond is equal to its time to maturity. The convexity ...