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Zero coupon bond calculation example

Although the tax loopholes were closed quickly, the bonds themselves are desirable because of their simplicity.


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In India, the tax on income from deep discount bonds can arise in two ways: interest or capital gains. It is also a law that interest has to be shown on an accrual basis for deep discount bonds issued after February From Wikipedia, the free encyclopedia. This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed.


  • Zero-coupon bond.
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  • The Zero Coupon Bond: Pricing and Charactertistics.
  • The Zero Coupon Bond: Pricing and Charactertistics.

Derivatives Credit derivative Futures exchange Hybrid security. Foreign exchange Currency Exchange rate.

Bond Yield to Maturity (YTM) Calculator

Forwards Options. Spot market Swaps. New York: Addison Wesley. Retrieved Securities and Exchanges Commission.

About Zero Coupon Bond Calculator

Bond market. Bond Debenture Fixed income. Accrual bond Auction rate security Callable bond Commercial paper Consol Contingent convertible bond Convertible bond Exchangeable bond Extendible bond Fixed rate bond Floating rate note High-yield debt Inflation-indexed bond Inverse floating rate note Perpetual bond Puttable bond Reverse convertible securities Zero-coupon bond. Asset-backed security Collateralized debt obligation Collateralized mortgage obligation Commercial mortgage-backed security Mortgage-backed security.

Zero Coupon Bond Value

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Namespaces Article Talk. The floating coupon rate usually consists of two parts:. For example, if coupon payments are made semiannually, the 6-month LIBOR can be used as the floating benchmark.

What Is A Zero Coupon Bond Example?

We should also highlight the inflation-indexed bond, which can have either a floating coupon rate tied to the inflation rate, e. Because the inflation rate has a greater influence on the current level of interest rates such a bond is also usually traded close to its par value. The relative price approach of bond valuation focuses on determining the required rate of return.

Under such an approach, the bond is priced relative to yield to maturity YTM of a benchmark usually a government bond of similar maturity. The resulting interest rate is then used as the discount rate. The term discount bond is used to reference how it is sold originally at a discount from its face value instead of standard pricing with periodic dividend payments as seen otherwise.

Bond Yield to Maturity (YTM) Calculator

To find the zero coupon bond's value at its original price, the yield would be used in the formula. After the zero coupon bond is issued, the value may fluctuate as the current interest rates of the market may change. The formula would be shown as.

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