# Zero Coupon Bond Calculator

Zero Coupon Bond Calculator is used to calculate the discount bond value based on the Face value of the bond

Zero Coupon Bond Value:
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#### Background Information

What is a Zero Coupon Bond?
A zero coupon bond is a bond that does not pay dividends or coupons per period but instead is sold at a discount from the face value.
Importance of Zero Coupon Bond
A zero coupon pays one lump sum on maturity bond and not dividend payments. Face value is the amount paid at maturity. The term â€˜discount bondâ€™ shows that how it is sold originally. At a discount from its face value instead of the standard pricing; inclusive of the periodic dividend payments.
Formula
Zero coupon bond value = (Face Value / Current Price of Bond) ^ (1 / Years to Maturity) - 1
Example
Letâ€™s consider \$1,000 zero coupon bond that has 2 years until maturity. The bond is currently valued at \$925 (the price it could be purchased at today). The formula would look like: (1000 / 925) ^ (1 / 2) - 1. When solved according to the above formula, this equation produces a value of 0.03975, or 3.98%.
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