Zero coupon bond formula rate of return

When solved, this equation produces a value of 0. Find the value of the zero-coupon bond as at 31 December and Andrews expected income for the financial year 20X3 from the bonds. Since there are no interim cash flows, the investor is assured of a fixed rate of return.

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Zero Coupon Bond Also known as Pure Discount Bond or Accrual Bond refers to those bonds which are issued at a discount to its Par Value and makes no periodic interest payment unlike a normal coupon bearing Bond. Terms of Use Privacy Policy Disclaimer.

Generally, bonds that are riskier will require a higher rate of return in order to attract buyers. They are also more advantageous when placed in retirement accounts where they remain tax-sheltered.

Zero coupon bond formula rate of return
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