Valuation of a zero coupon bond | Free template

Valuation of a zero coupon bond is a free template to calculate the value or settlement amount for a zero coupon bond based on the nominal value, market interest rate and remaining maturity.

Zero coupon bonds are issued by the government, residential institutions, businesses, municipalities, county councils and banks to satisfy a long-term capital need. Zero coupon bonds are traded on the bond market and have maturities of more than 1 year.

Issuance and trading of zero-coupon bonds are managed through distributors such as banks and stockbrokers. The prices of zero coupon bonds are given as a simple annual percentage or yield. Interest rates on zero coupon bonds issued by the government are called the risk-free rate. Zero coupon bonds are tradable debt instruments which means that a zero coupon bond is set to the holder which makes it possible to buy and sell already issued zero coupon bonds on the bond market.

Zero coupon bonds are bonds with no interest payments. Zero coupon bonds are sold to the discounted value of the nominal amount received at maturity. The settlement amount to be paid for a zero coupon bond is given by the current market rate for the bond and the remaining time to maturity. A higher interest rate ceteris paribus gives a lower settlement amount and a shorter timeframe remaining to maturity results in a higher settlement amount.

In this model for valuation of zero coupon bonds, you can calculate the value or settlement amount for a zero coupon bond. Updated: 01/01/2015 | Created by All-templates.biz

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