A zero coupon bond is a bond which pays no interim cashflow (i.e. coupons).
We usually price on the basis of percentage of Face Value (i.e. $100).
So if you expected 5% return, semi annually, over the 3 years remaining on the life of a ZC Bond, the price would be;
100/(1+Yield/frequency)^(TermXfrequency)
100/(1+5%/2)^(3X2) = $86.23
So you'd pay $86.23 now and get $100 back in 3 years. If so, then your return would be 5% s.a.
Accrued interest is usually calculated like this: Accrued interest = face value of the bonds x coupon rate x factor. Coupon = Annual interest rate/Number of payments. Factor = time coupon is held after last payment/time between coupon payments.
You would need to know a Yield To Maturity to answer this question.
I have no idea what the "calculated form" of a number is, but the digit in the units place of 7,350 is zero.
a coupon for rations
I am not quite sure what you mean with "log you"; the log is calculated for numbers. The following logarithms are undefined: For real numbers: the logarithm of zero and of negative numbers is undefined. For complex numbers: the logarithm of zero is undefined.
A zero-coupon note is a note which pays at maturity the value of the note with no separate interest payments.
Zero coupon bonds do not pay interest and are therefore sold at a steep discount to face value depending on the maturity date of the bond. Due to the time value of money, the discount on a 30 year zero coupon bond will be much greater than on a 10 year zero coupon bond. At maturity bondholders will receive the full face value of the bond which provides bondholders a return. For example, a 30 year zero coupon bond with a face value of $1,000 and sold for $500 would return a $500 profit after 30 years. Holders of zero coupon bonds can sell the bonds at any time before maturity. If an investor bought zero coupon bonds prior to a steep drop in interest rates, the value of the zero coupon bonds would increase and could be sold at a profit.
A zero-coupon bond is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity. It does not make periodic interest payments, or have so-called "coupons," hence the term zero-coupon bond.
if a bond has finite maturity or limited maturity then we must consider not only the interest rate stream but also the maturity value (face value).regardsSajida Gul
Zero coupon bonds issued by the US Treasury are issued at a discount to face value. An investor holding zero coupon bonds is paid the full face value when the zero coupon bond matures. The difference between the purchase price and the maturity value is know as the original issue discount which represents the interest earned on the zero coupon bond. Although a zero coupon bond does not pay annual interest, an investor must pay taxes each year based on the imputed receipt of income. Since the investor is not receiving interest payments during the life of the bond, taxes would be paid on interest income not actually received until bond maturity. Due to the yearly tax liability on imputed interest, it makes sense for most investors to hold zero coupon bonds in a tax deferred retirement account. The interest earned on zero coupon bonds issued by the US Treasury are exempt from state and local taxes.
3 years zero coupon bond. face value $100 and present market value $75. What will be its Macualay Duration and Modified Duration?
The advantage of buying zero-coupon bonds is that when they reach maturity, the investor then receives the full face value of the bond. These bonds became popular in the 1980's even though they were first released in the 1960's.
Yield usually refers to yield to maturity. If a bond is trading at par it usually means the yield to maturity is equal to the coupon.
Zero Coupon Municipal Bonds are special because, unlike other bonds, they have no periodic interest payments. Rather, the investor receives one payment at maturity. This payment is equal to the amount invested, plus the interest earned, compounded semiannually.
A zero coupon is, in a financial sense, a security which does not pay interest periodically.
It goes to the investor who buys the bond. A zero coupon bond is a bond in which, the investor need not pay any premium (coupon) above the face value of the bond while purchasing it. Let us say a company issues a $10,000 bond at a discount of 10% with zero coupon, it is enough if the investor pays $9000 to buy the bond. At the time of maturity he would get back $10,000. This 10% discount can be compared to the interest earned on the investment for the investor.
Yes. At maturity you get the final coupon payment in addition to the return of principal.