Zero Coupon Bond Valuation Tutorial
Key Snapshots
Zero Coupon Bond Formula
The generalised Zero Coupon Bond formula is:
![\[P = \frac{Par_n}{(1+YTM)^n}\]](https://www.ferventlearning.com/wp-content/ql-cache/quicklatex.com-b167815153ae634d601a88a243e5b5f7_l3.svg?495a33&495a33 "Rendered by QuickLaTeX.com")
Where:
reflects the price of a zero coupon bond.
represents the Par Value (aka Face Value) at time 
.- And
denotes the Yield to Maturity (aka bond yield).
reflects the price of a zero coupon bond.
represents the Par Value (aka Face Value) at time 
.
denotes the Yield to Maturity (aka bond yield).Jargon Buster
Zero Coupon Bonds are also called “Deep Discount” bonds. That’s because these bonds trade at a discount (their Price is lower than the Par value).
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