Zero coupon yield: Difference between revisions
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'''Example''' | |||
The zero coupon yield for the maturity 0-3 periods is 2% per period. | |||
This means that a deposit of £1,000,000 at Time 0 periods would return: | |||
£1,000,000 x 1.02<sup>3</sup> | |||
= £1,061,208 at Time 3 periods. | |||
An application of zero coupon yields is the pricing of zero coupon bonds. | |||
The zero coupon rate is also known as the Zero coupon rate, spot rate, or spot yield. | |||
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* [[Flat yield curve]] | * [[Flat yield curve]] | ||
* [[Forward yield]] | * [[Forward yield]] | ||
* [[Par yield]] | |||
* [[Spot rate]] | * [[Spot rate]] | ||
* [[Yield curve]] | * [[Yield curve]] | ||
* [[Zero]] | * [[Zero]] | ||
* [[Zero coupon bond]] | * [[Zero coupon bond]] | ||
Revision as of 12:20, 11 November 2015
The rate of return on an investment today, for a single cashflow at maturity of the instrument.
Equal to the current market rate of return on zero coupon bonds of the same maturity.
Example
The zero coupon yield for the maturity 0-3 periods is 2% per period.
This means that a deposit of £1,000,000 at Time 0 periods would return:
£1,000,000 x 1.023
= £1,061,208 at Time 3 periods.
An application of zero coupon yields is the pricing of zero coupon bonds.
The zero coupon rate is also known as the Zero coupon rate, spot rate, or spot yield.
