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Zero Coupon Bond Effective Yield

The zero coupon bond effective yield formula is used to calculate the periodic return for a zero coupon bond, or sometimes referred to as a discount bond.

A zero coupon bond is a bond that does not pay dividends (coupons) per period, but instead is sold at a discount from the face value.

f p 1 n-1

Here,f=face value,p=present value,n=number of periods.

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