Zero Coupon Bond Calculator
A zero coupon bond pays nothing until it matures, then pays its full face value. The price is that face value discounted back over the years, so you pay less than face value today.
- Free
- Works offline after your first visit
- Saves on this device
- No sign-up
- Updated
How it works
The price is face value divided by one plus the yield, raised to the number of years. This assumes the yield compounds once a year.
The difference between face value and price is the growth the bond builds up, which is paid as one lump at maturity. Any tax on that growth is not part of this calculation.
Worked example
A bond paying $1,000.00 at maturity in 10 years, at a yield of 5%, is priced at $613.91 today. The difference of $386.09 is the growth built up over the years.
Questions
Why do zero coupon bonds sell at a discount?
There are no interim payments, so the whole return comes at the end. The buyer accepts a lower price today to receive the full face value later.
What does the yield mean here?
It is the annual rate that makes today's price grow to face value by maturity. This calculator compounds it once a year.
Can the price change before maturity?
Yes. If market yields change, the price of a bond sold before maturity moves with them.
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