# Formula zero coupon rate

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- Calculating Yield to Maturity of a Zero-Coupon Bond!
- Converting from par rates - ACT Wiki.

In addition, the original investment will also be repaid at Time 2. The one period par rate p represents the identical deal to the one period zero coupon rate z The conversion of par rates to zero coupon rates is sometimes known as ' bootstrapping ', because the results of calculating each earlier zero coupon rate are used successively to calculate the next-longer maturity zero coupon rate.

## Price of a zero coupon bond

Example 2: Converting from zero coupon rates to forward rates. Given the calculated zero coupon rates z , the forward rates f can also be calculated in turn. The calculation of forward rates from zero coupon rates is explained in more detail on the page Converting from zero coupon rates. Jump to: navigation , search.

The par yield is known as the Par rate, Swap rate or Swap yield. In contrast, the formula for the bond equivalent yield does not take compounding into consideration.

For this reason, the formula for bond equivalent yield is primarily used to compare discount bonds of short maturity, specifically less than one year. The formula for calculating the effective yield on a discount bond, or zero coupon bond, can be found by rearranging the present value of a zero coupon bond formula:.

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By subtracting 1 from the both sides, the result would be the formula shown at the top of the page. This site was designed for educational purposes.

## Zero Coupon Bond Value - Formula (with Calculator)

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