Zero-coupon bond calculator

Face value

Yield (annual %)

Years to maturity

Compounding

Price

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Price = Face value / (1 + yield/n)^n×years, where n is the compounding frequency. No coupon payments to account for - the entire return is the gap between the purchase price and the face value received at maturity.

What makes a zero-coupon bond different

An ordinary bond pays periodic interest (coupons) and returns its face value at maturity. A zero-coupon bond pays no interest at all along the way - it is sold below face value and the entire return is the gap between what you pay now and the face value you receive at maturity. Because there are no coupon payments to account for, its price is a single, direct present-value calculation: Price = Face value / (1 + yield)^years.

Price and yield are two views of the same trade

Given a face value, a yield and a time to maturity, this returns the price. Given a face value, a purchase price and a time to maturity, it reverses the formula to return the implied yield - the return you are actually locking in at that price, which is usually the more useful question once a real price is on the table.

Semi-annual compounding

Bond yields are conventionally quoted and compounded semi-annually rather than annually, which this uses by default (an annual-compounding option is also available) - using the wrong compounding convention silently shifts the price by a small but real amount, so which one was used is stated plainly rather than left ambiguous.